group income statement - massmart · current assets 18,687.6 17,870.1 other current financial...

MASSMART GROUP ANNUAL FINANCIAL STATEMENTS 2015

GROUP INCOME STATEMENTFor the year ended 27 December 2015

December 2015 December 2014

Rm Notes 52 weeks 52 weeks

Revenue 5 84,857.4 78,319.0

Sales 5 84,731.8 78,173.2

Cost of sales (68,689.6) (63,610.8)

Gross profit 16,042.2 14,562.4

Other income 5 125.6 145.8

Depreciation and amortisation 13 and 15 (946.2) (846.6)

Impairment of assets 6 (25.7) (24.6)

Employment costs (6,784.3) (6,109.0)

Occupancy costs (2,865.6) (2,678.8)

Other operating costs (3,245.8) (3,033.3)

Operating profit before foreign exchangemovements and interest

2,300.2 2,015.9

Foreign exchange loss 7 (149.8) (49.8)

Operating profit before interest 8 2,150.4 1,966.1

- Finance costs (507.7) (386.8)

- Finance income 32.4 41.5

Net finance costs 9 (475.3) (345.3)

Profit before taxation 1,675.1 1,620.8

Taxation 10 (505.9) (483.4)

Profit for the year 1,169.2 1,137.4

Profit attributable to:

- Owners of the parent 1,112.8 1,079.8

- Non-controlling interests 56.4 57.6


Earnings per share (cents) 12

Basic EPS 513.5 497.8

Diluted basic EPS 506.1 492.9


GROUP STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 27 December 2015




Items that will not subsequently be re-classified to the Income

Statement 5.0 (8.9)

Net post-retirement medical aid actuarial profit/(loss) 5.0 (8.9)

Items that will subsequently be re-classified to the Income Statement (21.2) (55.6)

Net foreign currency translation reserve 23 (21.5) (53.7)

Cash flow hedges – effective portion of changes in fair value 23 4.4 1.4

Less taxation relating to the cash flow hedges 18 (1.2) (0.4)

Fair value movement on available-for-sale financial assets 16 (3.5) (3.7)

Less taxation relating to the available-for-sale financial assets 18 0.6 0.8

Total other comprehensive loss for the year, net of taxation (16.2) (64.5)

Total comprehensive income for the year 1,153.0 1,072.9

Total comprehensive income attributable to:

- Owners of the parent 1,096.6 1,015.3

- Non-controlling interests 56.4 57.6

Total comprehensive income for the year 1,153.0 1,072.9


GROUP STATEMENT OF FINANCIAL POSITIONFor the year ended 27 December 2015

Rm Notes December 2015 December 2014

ASSETSNon-current assets 12,031.2 11,018.3

Property, plant and equipment 13 8,117.8 7,239.2

Goodwill 14 2,589.4 2,542.9

Other intangible assets 15 409.7 415.8

Investments 16 145.5 135.3

Other financial assets 17 19.6 22.9

Deferred taxation 18 749.2 662.2

Current assets 18,687.6 17,870.1

Other current financial assets 17.1 - 229.3

Inventories 19 11,934.5 11,228.8

Trade, other receivables and prepayments 20 4,697.4 4,288.3

Taxation 50.8 56.3

Cash on hand and bank balances 38.11 2,004.9 2,067.4

Non-current assets classified as held for sale 21 11.5 18.0

Total assets 30,730.3 28,906.4

EQUITY AND LIABILITIES

Equity attributable to owners of the parent 5,636.0 5,334.4

Share capital 22 2.2 2.2

Share premium 22 675.1 733.4

Other reserves 23 735.3 550.5

Retained profit 4,223.4 4,048.3

Non-controlling interests 155.1 192.8

Total equity 5,791.1 5,527.2

Non-current liabilities 3,053.4 3,236.8

Interest-bearing borrowings 24 1,819.6 2,133.9

Interest-free borrowings 24 1,035.5 926.6

Provisions 25 124.8 115.0

Deferred taxation 18 73.5 61.3

Current liabilities 21,885.8 20,142.4

Trade and other payables 26 19,927.7 18,323.5

Provisions and other 27 150.0 195.4

Taxation 155.6 208.3

Other current liabilities 28 1,206.1 831.2

Bank overdrafts 38.11 446.4 584.0

Total equity and liabilities 30,730.3 28,906.4


GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 27 December 2015

Rm

Share

capital

Share

premium

Other

reserves

Retained

profit

Equity

attributable

to owners of

the parent

Non-controlling

interests Total

Balance as at December 2013 2.2 743.3 517.6 3,909.9 5,173.0 196.6 5,369.6

Total comprehensive income - - (64.5) 1,079.8 1,015.3 57.6 1,072.9

- Profit for the year - - - 1,079.8 1,079.8 57.6 1,137.4

- Other comprehensive loss for the year - - (64.5) - (64.5) - (64.5)

Dividends declared (note 11) - - - (914.0) (914.0) - (914.0)

Net changes in non-controlling interests - - (27.6) - (27.6) (11.0) (38.6)

Distribution to non-controlling interests - - - - - (50.4) (50.4)

Share-based payment expense (note 23 and note 29) - - 125.1 - 125.1 - 125.1

Share trust net consideration - - - (27.4) (27.4) - (27.4)

Treasury shares (note 22 and note 23) - (9.9) (0.1) - (10.0) - (10.0)


Total comprehensive income - - (16.2) 1,112.8 1,096.6 56.4 1,153.0

- Profit for the year - - - 1,112.8 1,112.8 56.4 1,169.2

- Other comprehensive loss for the year - - (16.2) - (16.2) - (16.2)

Dividends declared (note 11) - - - (914.1) (914.1) - (914.1)

Net changes in non-controlling interests - - (18.7) - (18.7) (41.4) (60.1)

Distribution to non-controlling interests - - - - - (52.7) (52.7)

Share-based payment expense (note 23 and note 29) - - 218.5 - 218.5 - 218.5

Share trust net consideration - - - (23.6) (23.6) - (23.6)

Treasury shares (note 22 and note 23) - (58.3) 1.2 - (57.1) - (57.1)


The non-controlling interests at year end comprise store managers’ holdings in the Masscash Division.

In the current financial year net changes in non-controlling interests represent the acquisitions of non-controlling interest by the Masscash Division. In the prior financial year, net changes

in non-controlling interests represent acquisitions of non-controlling interests by the Masswarehouse and Masscash Divisions.

Distribution to non-controlling interests comprise dividends paid to non-controlling shareholders during the year.

1

2

3

2

3

1

2

3


GROUP STATEMENT OF CASH FLOWSFor the year ended 27 December 2015



CASH FLOWS FROM OPERATING ACTIVITIES

Cash inflow from trading activities 38.1 3,384.4 2,983.4

Working capital movements 38.2 372.0 (295.1)

Cash generated from operations 3,756.4 2,688.3

Interest paid (469.4) (386.8)

Interest received 32.4 41.5

Dividends received 40.3 -

Taxation paid 38.3 (631.0) (683.4)

Dividends paid (958.3) (914.0)

Net cash inflow from operating activities 1,770.4 745.6

CASH FLOWS FROM INVESTING ACTIVITIES

Investment to maintain operations 38.4 (983.7) (857.4)

Investment to expand operations 38.5 (710.7) (1,322.1)

Proceeds on disposal of property, plant and equipment 38.6 38.7 32.5

Proceeds on disposal of non- current assets classified as held for sale 38.7 23.1 -

Investment in subsidiaries and businesses 38.8 (16.9) (14.4)

Other net investing activities 38.9 3.9 14.9

Net cash outflow from investing activities (1,645.6) (2,146.5)

CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease)/ increase in non-current liabilities (314.1) 969.8

Increase in current liabilities 372.3 445.9

Non-controlling interests acquired 38.10 (60.1) (38.6)

Net acquisition of treasury shares (23.6) (27.4)

Net cash (outflow)/inflow from financing activities (25.5) 1,349.7

Net increase/(decrease) in cash and cash equivalents 99.3 (51.2)

Foreign exchange movements (24.2) (53.7)

Cash and cash equivalents at the beginning of the year 1,483.4 1,588.3

Cash and cash equivalents at the end of the year 38.11 1,558.5 1,483.4


NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTSFor the year ended 27 December 2015

1. Accounting policies

General

These consolidated Annual Financial Statements comprise Massmart Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”).

The Group operates retail stores in nine formats in sub-Saharan Africa, aggregated into four reportable segments, focused on high-volume, low-margin, low-cost distribution

of mainly branded consumer goods for cash.

The principal offering for each segment is as follows:

Massdiscounters – general merchandise discounter and food retailer

Masswarehouse – warehouse club

Massbuild – home improvement retailer and building materials supplier

Masscash – food wholesaler, retailer and buying association.

The Group’s four divisions operate in two principal geographical areas, South Africa and the rest of Africa, and the Group’s geographic segments are reported on this basis.

Basis of accounting

The Group Annual Financial Statements have been prepared on the historical cost basis, except for certain financial instruments and non-current assets held for sale.

These Group Annual Financial Statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of

International Financial Reporting Standards (IFRS), Interpretations issued by the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by

the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listing Requirements and the

requirements of the Companies Act, 71 of 2008 of South Africa. The accounting policies are consistent with that of the previous financial year as none of the amendments

coming into effect in the current financial year have had a material impact on the financial reporting of the Group. During the current period the Group reassessed the

designation of a number of its intercompany loans to its foreign operations in Africa, as per IAS 21 The Effects of Changes in Foreign Currencies. As a result, certain loans were

designated as part of the Group’s net investment in these foreign operations and the associated foreign exchange gains and losses have been recognised in the foreign

currency translation reserve.

The principal accounting policies adopted are set out below.

Basis of consolidation

The Group Annual Financial Statements incorporate the Annual Financial Statements of the Company and the entities it controls as at 27 December 2015. Control is achieved

when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the

investee. The Group considers all relevant facts and circumstances in assessing whether it has power over an investee and re-assesses whether or not it controls an investee if

facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains

control over the subsidiary and ceases when the Group loses control of the subsidiary. A change in the ownership interest of a subsidiary, without a loss of, is accounted for

as an equity transaction. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year, are included in the Statement of Comprehensive

Income, Statement of Financial Position and the Statement of Cash Flows, from the date the Group gains control until the date the Group ceases to control the subsidiary.

All inter-company transactions and balances, income and expenses are eliminated in full on consolidation. The financial statements of the subsidiaries are prepared for the

same reporting year as the parent company, using consistent accounting policies. Where necessary, adjustments are made to the financial statements of subsidiaries to bring

the accounting policies used in line with those used by the Group.

Separate disclosure is made of non-controlling interests where the Group’s investment is less than 100%. Non-controlling interests consist of the amount of those interests at

the date of the original business combination and the allocated share of changes in equity since the date of the combination. Total comprehensive income within a

subsidiary is attributed to the non-controlling interest even if it results in a deficit balance. The Group applies a policy of treating transactions with non-controlling interest

holders as transactions with equity holders of the Group. Disposals to non-controlling interest holders that do not result in the loss of control, result in gains and losses for

the Group that are recorded directly in the Statement of Changes in Equity. The difference between any consideration paid and the relevant share of the net asset value

acquired from non-controlling interests is recorded directly in the Statement of Changes in Equity.

Fair value measurement

The Group measures financial instruments such as derivatives and certain investments at fair value at each reporting date. The fair values of financial instruments measured at

amortised cost are disclosed should it be determined that the carrying value of these instruments does not reasonably approximate their fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The

fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market

participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic

benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant

observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on

the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between the

Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each

reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability

and the level of the fair value hierarchy as explained above.

Fair value of financial instruments

The fair values of listed investments are calculated by reference to stock exchange quoted selling prices at the close of business on the reporting date, without any deduction

for transaction costs. For financial instruments not traded in an active market, the fair value is determined using the appropriate valuation techniques which include:

Using recent arm’s length market transactions

Reference to the current fair value of another instrument that is substantially the same

A discounted cash flow analysis or other valuation models

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the fair values, at the date of

exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are

expensed as incurred and included in other operating costs in the Income Statement. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the

conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups)

that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value

less costs to sell. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share

of the acquiree’s net fair value of the identifiable net assets.

Any contingent consideration forming part of the purchase price is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability

that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value

recognised in the Income Statement. If the contingent consideration is not within this scope, it is measured in accordance with the appropriate IFRS. Contingent

consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill

Goodwill arising on consolidation of a subsidiary represents the excess of the fair value of the consideration transferred, the recognised amount of the non-controlling

interests in the acquiree, and if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, over the net recognised amount

(generally fair value) of the identifiable assets acquired and liabilities assumed. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets

acquired (i.e. discount on acquisition) is credited to the Income Statement as a gain on bargain purchase in the year of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing,

goodwill is allocated to each of the Group’s cash-generating units (CGUs) (or group of CGUs) expected to benefit from the synergies of the combination, and represent the

lowest level within the Group at which management monitors goodwill. CGUs to which goodwill have been allocated are tested for impairment annually, or more frequently

when there is an indication that the units may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the units, the impairment loss is

allocated first to reduce the carrying amount of any goodwill allocated to the units and then to the other assets of the units pro-rata on the basis of the carrying amount of

each asset in the units. An impairment loss recognised for goodwill is not reversed in a subsequent year.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through

continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present

condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of

classification.

Non-current assets and disposal groups classified as held for sale are measured at the lower of the assets’ previous carrying amount and fair value less costs to sell, other than

financial assets and deferred tax assets which continue to be measured in accordance with their relevant accounting standards.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

Property, plant and equipment

Property, plant and equipment are initially recognised at acquisition cost, including any costs directly attributable to bringing the assets to the location and condition

necessary for it to be capable of operating in the manner intended by the Group’s management.

Other than freehold land, which is subsequently carried at cost less accumulated impairment losses, property, plant and equipment are subsequently carried at cost less

accumulated depreciation, reduced by any accumulated impairment losses.

The cost of property meeting the definition of a qualifying asset in terms of IAS 23 Borrowing Costs includes borrowing costs capitalised in terms of the Group’s borrowing

cost policy.

Where expenditure incurred on property, plant and equipment will lead to future economic benefits accruing to the Group, these costs are capitalised. Repairs and

maintenance not meeting this criterion are expensed as and when incurred.

Depreciation commences when the asset is ready for its intended use and is charged so as to write down the cost of the assets, other than freehold land, to their residual

values, over their useful lives, using the straight-line method, recognised in profit or loss on the following bases:

Buildings 50 years

Fixtures, fittings, plant, equipment and motor vehicles 4 to 15 years

Computer hardware 3 to 8 years

Leasehold improvements shorter of lease period or useful life

Useful lives and residual values are reviewed annually, at each reporting year-end and the prospective depreciation is adjusted accordingly if necessary.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. If

there is an option to purchase the leased asset and it is virtually certain that this option will be exercised, the leased asset is depreciated over the leased asset’s expected

useful life.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is

recognised in the Income Statement.

Intangible assets

Intangible assets comprise right of use assets, trademarks and computer software and are measured initially at purchased cost. Right of use assets are measured at cost,

which is calculated based on the site negotiation agreement. Research costs are expensed as incurred. Development costs are recognised as an expense in the period in

which they are incurred unless the technical feasibility of the asset has been demonstrated and the intention to complete and utilise the asset is confirmed. Capitalisation

commences when it can be demonstrated how the intangible asset will generate probable future economic benefits, that it is technically feasible to complete the asset, that

the intention and ability to complete and use the asset exists, that adequate financial, technical and other resources to complete the development are available and the

costs attributable to the process or product can be separately identified and measured reliably. Where development costs are recognised, it has a finite useful life and is

amortised over its useful life on a straight-line basis and is tested for impairment if indications of impairment exist. Intangible assets are measured at cost less accumulated

amortisation, and reduced by any accumulated impairment losses.

The useful lives of intangible assets are assessed as either finite or indefinite. The Group has no intangible assets with indefinite useful lives other than goodwill which is

detailed separately.

For intangible assets with finite useful lives, amortisation is charged so as to write off the asset over the estimated useful life, to its residual value, using the straight-line

method, on the following basis:

Trademarks 10 years

Right of use 10 years

Computer software 3 to 8 years

Useful life is reviewed annually, at each reporting period and the prospective amortisation is adjusted accordingly if necessary.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the intangible asset

and is recognised in the Income Statement.

Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets (excluding goodwill) to determine whether there is any indication that

those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Where it is not possible to estimate the recoverable amount for an individual asset, the recoverable amount is determined for the CGU to which the asset belongs. Where a

reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of

CGUs for which a reasonable and consistent allocation basis can be identified.

The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their

present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value

less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable

amount. Impairment losses are recognised as an expense immediately in the Income Statement.

An assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If

such indication exists, the Group estimates the asset’s (or CGUs) recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of an asset (or

CGU) is increased to the revised estimate of its recoverable amount. This is done so that the increased carrying amount does not exceed the carrying amount that would

have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in the

Income Statement.

Goodwill is tested at least annually for impairment as indicated above. However, impairment losses relating to goodwill cannot be reversed in future years.

Revenue recognition

Revenue of the Group comprises net sales, royalties and franchise fees, investment income, property rentals, management and administration fees, commissions and fees,

dividends, distribution income, income from insurance premium contributions and excludes value-added tax. Revenue is recognised to the extent that it is probable that the

economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when payment is being made. Revenue is measured at the fair value of the

consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, volume rebates,

returns and sales-related taxes. Payment is usually received via cash, debit card or credit card. Related card transaction costs are recognised in the Income Statement as other

operating expenses. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The specific recognition criteria

described below must also be met before revenue is recognised.

Sales of merchandise

Revenue is recognised when the significant risks and rewards of ownership have passed to the buyer, usually when the goods are delivered and title has passed. Revenue

from the sale of gift cards is recognised when they are redeemed by customers in exchange for products supplied by the Group.

Logistics services

Revenue is earned from delivering goods to customers.

Interest income

Revenue is accrued on a time apportionment basis, by reference to the principal outstanding and the effective interest rate.

Dividend income

Revenue is recognised when the shareholders’ right to receive payment has been established, which is generally when shareholders approve the dividend.

Property rental

Property rental receivable under operating leases is credited to profit or loss on a straight-line basis over the term of the relevant lease.

Commissions

Commissions are recognised on an accrual basis in accordance with the substance of the relevant agreement when the sale which gives rise to the commission has

occurred.

Other revenue is recognised on the accrual basis in accordance with the substance of the relevant agreements and measured at fair value of the consideration receivable.

Where the Group enters into sales transactions involving a range of the Group’s products and services, the Group applies the revenue recognition criteria set out above to

each separately identifiable component of the sales transaction. The consideration received from these multiple-component transactions is allocated to each separately

identifiable component in proportion to its relative fair value.

Leasing

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for

whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is

not explicitly specified in an arrangement.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified

as operating leases.

Assets held under finance leases are capitalised at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The

corresponding liability to the lessor, net of finance charges, is included in the Statement of Financial position as a finance lease obligation. Lease payments are apportioned

between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are

charged to the Income Statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term,

the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Rentals payable under operating leases are charged to the Income Statement on a straight-line basis over the term of the relevant lease. Contingent rental costs are

expensed when incurred.

Foreign currencies

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (i.e. its functional

currency). For the purpose of the Group Annual Financial Statements, the results and financial position of each entity are expressed in the functional currency of the Group,

which is the presentation currency for the Group Annual Financial Statements (South African Rand).

Transactions and balances

Transactions denominated in foreign currencies are initially recorded at their functional currency spot rates on the dates of the transactions.

At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated using functional currency spot rates on the reporting date.

Non-monetary items carried at fair value that are denominated in foreign currencies are translated using functional currency spot rates on the date when the fair value was

determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the functional currency spot rates at the date of the

initial transactions.

Exchange differences arising on the settlement and translation of monetary items are included in the Income Statement for the year. Exchange differences arising on the

translation of non-monetary items carried at fair value are included in the Income Statement for the year. However, where fair value adjustments of non-monetary items are

recognised in other comprehensive income, exchange differences arising on the translation of these non-monetary items are also recognised in other comprehensive

income.

Group companies

On consolidation, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the reporting date. Income and expense items are

translated at exchange rates prevailing at the dates of the transactions where possible, or at the average exchange rates for the year. Exchange differences are recognised in

other comprehensive income and transferred to the Group’s foreign currency translation reserve. Such translation differences are recycled in the Income Statement in the

year in which the foreign operation is disposed of, and is recognised as part of the gain or loss on disposal of the foreign operation.

On consolidation, exchange rate differences arising from the translation of the net investment in foreign operations are also taken to the foreign currency translation reserve

(FCTR). The Group’s net investment in a foreign operation is equal to the equity investment plus all monetary items that are receivable from or payable to the foreign

operation, for which settlement is neither planned nor likely to occur in the foreseeable future.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the spot

rate on the reporting date.

Retirement benefit costs

Group companies operate various pension schemes. The schemes are funded through payments to trustee-administered funds in accordance with the plan terms.

A defined-contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to

pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior years.

The Group’s contributions to defined-contribution plans in respect of services rendered in a particular year are recognised as an expense in that year. Additional

contributions are recognised as an expense in the year during which the associated services are rendered by employees.

Post-retirement healthcare benefits

The Group provides for post-retirement medical benefits, to qualifying employees and pensioners in certain companies within the Group. The expected costs of these

benefits are accrued over the period of employment based on past services and charged to the Income Statement as employee benefits. This post-retirement medical

benefit obligation is measured at present value by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the

currency in which the benefits will be paid and that have the terms to maturity approximating the terms of the related post-employment liability. The future cash outflows

are estimated using amongst others the following assumptions: health-care cost inflation; discount rates; salary inflation and promotions and experience increases; expected

mortality rates; expected retirement age; and continuation at retirement. Valuations of this obligation are carried out annually by independent qualified actuaries in respect

of past-service liabilities using the projected unit credit method. Actuarial gains or losses and settlement premiums, when they occur, are recognised immediately in other

comprehensive income and as employee benefits in the Income Statement respectively.

Short-term benefits

The cost of all short-term employee benefits is recognised as an expense during the period in which the employee renders the related service.

Liabilities for employee entitlements to wages, salaries and leave represent the amount that the Group has as a present obligation, as a result of employee services provided

to the reporting date, to the extent that such obligation can be reliably estimated. The accruals have been calculated at undiscounted amounts based on current wage and

salary rates.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current income tax

The tax charge payable is based on taxable profit for the year and any adjustment to tax payable/receivable relating to the prior year. Taxable profit differs from profit as

reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never

taxable or deductible. The Group’s liability for current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date in

the countries where the Group operates and generates taxable income.

Current income tax is recognised in the Income Statement, except when it relates to items recognised directly in equity, in which case it is recognised in other

comprehensive income and not in the Income Statement. Where applicable tax regulations are subject to interpretation, management will raise the appropriate provisions.

The recognition, measurement and classification of interest and tax-related penalties or damages are accounted for in terms of IAS 37 Provisions, Contingent Liabilities and

Contingent Assets and are recognised in profit or loss.

Deferred tax

Deferred tax is accounted for using the liability method in respect of temporary differences arising between the carrying amounts of assets and liabilities in the financial

statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, and the carry forward

of unused tax credits and any unused tax losses to the extent that it is probable that taxable profit will be available against which these can be utilised. Deferred tax assets

and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and

liabilities, which affects neither the taxable profit nor the accounting profit at the time of the transaction.

In respect of taxable temporary differences associated with investments in subsidiaries deferred tax liabilities are not raised when the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. In respect of deductible temporary differences

associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the

foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be

available to allow all or part of the asset to be recovered. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has

become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply to the year when the asset is realised or the liability settled, using tax rates and tax laws that have been

enacted or substantively enacted by the reporting date. Deferred tax is recognised in the Income Statement, except when it relates to items credited or charged to other

comprehensive income or directly to equity, in which case the deferred tax is recognised in either other comprehensive income or directly in equity.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same

tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will

be realised simultaneously.

Sales tax

Income, expenses, assets and liabilities are recognised net of the amount of sales tax, except when the sales tax is not recoverable from, or payable to, the taxation authority,

in which case it is recognised as part of the underlying item. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of other

receivables or payables in the Statement of Financial Position.

Any tax on capital gains is deferred if the proceeds of the sale of the assets are invested in similar assets, but the tax will ultimately become payable on sale of that similar

asset.

Inventories

Inventories which consist of food, liquor, general merchandise and home improvement merchandise, are valued at the lower of cost and net realisable value. Cost is

calculated on the weighted-average method. The cost of merchandise is the net of: invoice price of merchandise; insurance; freight; customs duties; an appropriate

allocation of distribution costs; trade discounts; rebates and settlement discounts. Rebates and discounts received as a reduction in the purchase price of inventories are

deducted from the cost of those inventories. Rebates earned on the sale of products based on advertising requirements are regarded as a reimbursement of costs already

incurred in general (i.e. not linked to inventories) and is deducted from cost of sales. Obsolete, redundant and slow-moving items are identified on a regular basis and are

written down to their estimated net realisable values. The amount of the write down is recognised as an expense in the Income Statement in the year in which it occurs. A

new assessment is made of net realisable value in each subsequent year. When the circumstances that previously caused inventories to be written down below cost no

longer exist or when there is clear evidence of an increase in net realisable value because of changed economic circumstances, the amount of the write down is reversed, so

that the new carrying amount is the lower of the cost and the revised net realisable value. The reversal is recorded in the Income Statement.

Financial instruments

Financial assets and financial liabilities are recognised on the Group’s Statement of Financial Position when the Group becomes a party to the contractual provisions of the

instrument.

Financial assets and liabilities are offset and the net amounts presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the

amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial instruments are initially recognised when the Group becomes party to the contractual terms of the instrument. They are initially measured at fair value including

transaction costs unless they are classified at fair value through profit or loss, in which case the transaction costs are expensed immediately. Subsequent to initial recognition,

these instruments are measured in accordance with their classification as set out below.

Financial assets

Financial assets are classified into the following specified categories:

Fair value through profit or loss (FVTPL)

These include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as

held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are covered separately and have their own accounting policy

‘Derivative financial instruments and hedge accounting’.

Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Held-to-maturity investments

These are non-derivative financial assets with fixed or determinable payments and fixed maturities and the Group has the positive intention and ability to hold them to

maturity.

Available-for-sale investments

These include equity investments and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor

designated at fair value through profit or loss. Debt securities are those that are intended to be held for an indefinite period of time and that may be sold for liquidity needs

or in response to changes in market conditions. The Group holds no debt securities classified as available-for-sale.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets are subsequently measured according to their category classification:


These are held at fair value and any adjustments to fair value are taken to the Income Statement.


These are held at amortised cost using the effective interest rate method less any impairment losses recognised to reflect irrecoverable amounts. Amortised cost is

calculated considering any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Amortisation is recognised in finance

income in the Income Statement. Impairment losses on loans and receivables are recognised in other operating costs in the Income Statement.

Held-to-maturity investments

These are held at amortised cost using the effective interest rate method less any impairment losses recognised to reflect irrecoverable amounts. Amortised cost is

calculated considering any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Amortisation is recognised in finance

income in the Income Statement. Impairment losses on loans and receivables are recognised in other operating costs in the Income Statement.


These are held at fair value and any adjustment to fair value is recognised as other comprehensive income as a non-distributable reserve until the investment is

derecognised, at which time the cumulative gain or loss is reclassified to the Income Statement and recognised in other operating costs. Where the investment is

determined to be impaired, the cumulative gain or loss is reclassified to the Income Statement.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are

recognised on the trade date, which is the date that the Group commits to purchase or sell the asset.

De-recognition

A financial asset is derecognised when the rights to receive cash flows have expired or the Group has transferred its right to receive cash flows from the asset, or has assumed

an obligation to pay the received cash flows in full without material delay to the third party (where the Group has transferred the risk and rewards of the asset or has

transferred control of the asset).

Impairment

At each reporting date, the Group reviews whether there is any objective evidence that a financial asset may be impaired as a result of one or more events that have

occurred since the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. Where objective evidence exists

an impairment loss is calculated.

Financial assets carried at amortised cost

The impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows. The discount rate applied is

the original effective interest rate and where a loan has a variable interest rate, the discount rate is the current effective interest rate. Impairment losses are reversed in

subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised,

subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had

the impairment not been recognised. The recovery is credited to the Income Statement.

Trade receivables are recognised net of an allowance for impairment. An allowance for impairment of trade receivables is established when there is objective evidence that

the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the

debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade

receivable is impaired. The amount of the allowance is the difference between the carrying amount of the receivable and the recoverable amount, being the present value

of the expected cash flows, discounted at the original effective interest rate. Any resulting impairment losses are included in other operating costs in the Income

Statement. When a receivable is uncollectible, it is written off against the allowance for impairment for receivables. Subsequent recoveries of amounts previously written off

are recognised in other operating costs in the Income Statement.

Available-for-sale investment

For available-for-sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is

impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the

investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its

original cost.

The impairment loss is measured as the difference between the acquisition cost and the current fair value, less any impairment loss previously recognised. Impairment

losses on equity investments are not reversed through the Income Statement; increases in fair value of the instrument that can be objectively related to an event occurring

after the recognition of the impairment, are recognised directly in other comprehensive income.

Effective interest rate method

This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating interest income and finance costs, over the relevant period. The

effective interest rate is the rate that exactly discounts estimated future cash receipts and payments through the expected life of the financial asset or financial liability, or,

where appropriate, a shorter period. Interest is recognised on an effective interest basis for financial instruments other than those financial assets designated as at fair value

through profit or loss and available-for-sale. Discounting of financial instruments carried at amortised cost is omitted where the impact of discounting is considered to be

immaterial.

Financial liabilities and equity

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Financial liabilities are classified into the following specified categories:


These include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss. Financial liabilities are

classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are covered separately and have their own

accounting policy ‘Derivative financial instruments and hedge accounting’.

Liabilities at amortised cost

These are non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active market.

The classification depends on the nature and purpose of the financial liabilities and is determined at the time of initial recognition. All financial liabilities are initially

recognised at fair value and, in the case of liabilities at amortised cost, net of directly attributable transaction costs.

Financial liabilities are subsequently measured according to their category classification:


Fair value gains and losses on liabilities at fair value through profit or loss are recognised in the Income Statement.

Liabilities at amortised cost

These are held at amortised cost using the effective interest rate method. Amortised cost is calculated considering any discount or premium on acquisition and fees or

costs that are an integral part of the effective interest rate. Amortisation costs are recognised in finance costs in the Income Statement in accordance with the Group’s

policy on borrowing costs.

De-recognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. Gains or losses are recognised in the Income Statement

when the liability is de-recognised. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing

liability is substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The

difference in the respective carrying amounts is recognised in the Income Statement.

Derivative financial instruments and hedge accounting

The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates.

The Group uses foreign exchange forward contracts to hedge its exposure to foreign currency fluctuations relating to certain firm trading commitments. The use of financial

derivatives is governed by the Group’s policies approved by the Board, which provide written principles on the use of financial derivatives consistent with the Group’s risk

management strategy. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply

hedge accounting. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the

entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the cash flows attributable to the hedged risk.

Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an on-going basis to determine that they have been

highly effective throughout the financial reporting periods for which they were designated. The Group does not trade in derivative financial instruments for speculative

purposes.

Derivative financial instruments are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates. Derivatives are

carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

The effective portion of the changes in fair value of derivative financial instruments that are designated and qualify as cash flow hedges are recognised in other

comprehensive income in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement. All cumulative gain or

loss on the hedging instrument recognised in other comprehensive income, is retained in equity until the forecast transaction is recognised in the Income Statement. If a

hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in other comprehensive income is reclassified to the Income Statement.

When the hedge is sold, expired, terminated, exercised, or no longer qualifies for hedge accounting the net cumulative gain or loss recognised in other comprehensive

income is transferred to the Income Statement.

All above-mentioned references to Income Statement recognitions are processed through cost of sales.

The Group does not hold any other fair value hedges or hedges of a net investment in a foreign operation.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits held on call with banks, investments in money-market instruments that are readily convertible to a known

amount of cash and are subject to an insignificant risk of change in value, and bank overdrafts. For the purpose of the Statement of Cash Flows, the Group‘s bank overdraft is

included within cash and cash equivalents.

Treasury shares

The Company’s own equity instruments that are reacquired are recognised at cost and deducted from equity. No gain or loss is recognised in the Income Statement on the

purchase, sale, issue or cancellation of the Company’s own equity instruments. Voting rights related to treasury shares are nullified for the Group and no dividends are

allocated to them. Share options exercised during the reporting year are satisfied with treasury shares, and where required, shares purchased in the market. Any difference

between the exercise price and the market price is recognised as a gain or loss in the Statement of Changes in Equity.

Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net

of any related income tax benefits. The cost of treasury shares acquired is recognised as a reduction of share premium.

Other components of equity include the following:

Re-measurements of net defined-benefit liability – comprises the actuarial losses from changes in demographic and financial assumptions and the return on plan assets;

Translation reserve – comprises foreign currency translation differences arising from the translation of financial statements of the Group’s foreign entities into ZAR; and

Reserves for Available for Sale financial assets and cash flow hedges – comprises gains and losses relating to these types of financial instruments and

Share-based employee remuneration.

Retained profit includes all current and prior period retained profits.

All transactions with owners of the parent are recorded separately within equity.

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a Directors’ meeting prior to the reporting

date.

Provisions

Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result

of past events, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are

measured at management’s best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is

material at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of

discounts is recognised as a finance cost. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its

obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of

continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset

may not exceed the amount of the related provision.

No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the

outflow of resources is remote.

Share-based payments

The Group issues equity-settled share-based payments to employees who are beneficiaries of the various Group Share Incentive Schemes. Equity-settled share-based

payments are measured at the fair value (excluding the effect of non-market-based vesting conditions) of the equity instruments issued at the date of the grant. The fair

value determined at the grant date of the equity-settled share-based payments is expensed in the Income Statement on a straight-line basis over the vesting period with a

corresponding increase in other reserves in equity, based on the Group’s estimate of equity instruments that will eventually vest and adjusted for the effect of

non-market-based vesting conditions. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has

expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.

Fair value is measured by use of binomial and lattice models. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of

non-transferability, exercise restrictions, and behavioural considerations.

Full share grants awarded may be settled by way of a purchase of shares in the market, use of treasury shares or issue of new shares. If new shares are issued to equity-settle

full share grants, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

Where shares are held or acquired by subsidiary companies for equity compensation plans, they are treated as treasury shares. Any gains or losses on vesting of such shares

are recognised directly in equity.

The effect of all full share grants issued under the share-based compensation plan is taken into account when calculating diluted earnings and diluted headline earnings per

share.

Borrowing costs

All borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Capitalisation of the

borrowing costs begins on commencement date and ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are

complete. Should active development of the qualifying asset be suspended, capitalisation of the borrowing costs during this period is also suspended. General borrowing

costs are capitalised by calculating the weighted average expenditure on the qualifying asset and applying a weighted-average borrowing rate to the expenditure. Specific

borrowing costs are capitalised when the borrowing facility is utilised specifically for the qualifying asset less any investment income on the temporary investment of these

funds. All other borrowing costs are recognised as an expense in the Income Statement in the year in which they are incurred. Borrowing costs consist of interest and other

costs that the Group incurs in connection with the borrowing of funds.

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and

expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the Group’s Executive

Committee to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. All inter-

segment transfers are carried out at arm’s length prices. For management purposes, the Group uses the same measurement policies as those used in its Group Annual

Financial Statements. In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment.

Cost of sales

Cost of sales primarily comprises the cost of goods sold and services provided, including an allocation of direct overhead expenses, net of supplier rebates, and costs incurred

that are necessary to acquire and store goods. Cost of sales also includes: the cost to distribute goods to customers where delivery is invoiced; inbound freight costs; internal

transfer costs between distribution centres and stores; warehousing costs and the cost of other shipping and handling activities; any write-downs and reversals of

write-downs to inventory; and any foreign currency exposure, including reclassified gains and losses on foreign currency hedging instruments, relating directly to goods

imported.


NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS


2. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the Group’s accounting policies

In the process of applying the Group’s accounting policies, which are described above, management has not made any critical judgements that have a significant effect on the amounts

recognised in the Financial Statements, except for:

Classification of leases as financing or operating in nature

The Group enters into commercial property leases for the majority of its stores. Where management has determined, based on an evaluation of the terms and conditions, that the lessor

retains all significant risks and rewards of these properties, it will account for the contracts as operating leases.

Business combination versus asset acquisition

During the prior year all of the property acquisitions were accounted for as asset acquisitions. The Directors assessed the properties acquired and concluded that in their view the

acquisitions were property acquisitions in terms of IAS 16 Property, Plant and Equipment and were therefore accounted for in terms of that standard. In the opinion of the Directors the

properties did not constitute a business as defined in terms of IFRS 3 Business Combinations, as there were not adequate processes identified within the properties to warrant

classification as businesses.

Key sources of estimation uncertainty

Deferred tax assets

Deferred tax assets are raised to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised, as well

as the acceptability and ability to execute tax planning strategies in respect of old and new stores. Assessment of future taxable profit is performed at every reporting date, in the form of

future cash flows using a suitable growth rate, as well as the acceptability and ability to execute tax planning strategies in respect of old and new stores. Details of deferred taxation can be

found in note 18. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.

Property, plant and equipment and other intangible assets

Property, plant and equipment and other intangible assets are depreciated over their useful lives taking into account, where appropriate, residual values. Assessment of useful lives and

residual values are performed annually, taking into account factors such as technological innovation, maintenance programmes, market information and management considerations. In

assessing the residual value of an asset, its remaining life, projected disposal value and future market conditions are taken into account. Detail on property, plant and equipment and other

intangible assets can be found in note 13 and 15 respectively.

Goodwill impairment

Determining whether goodwill is impaired requires an estimation of the value in use of the CGUs (or group of CGUs) to which goodwill has been allocated. The value in use calculation

requires the Group to estimate the future cash flows expected to arise from the CGU (or group of CGUs) and a suitable discount rate in order to calculate the present value. The carrying

amount of goodwill at the reporting date was R 2,589.4 million (December 2014: R2,542.9 million). Detail on goodwill can be found in note 14.

Inventory provisions

Inventory provisions include shrinkage, obsolescence, unearned rebates and write-downs which take into account historical information related to sales trends, aging profiles, market

factors and stock counts which impact the expected write-down between the estimated net realisable value and the original cost. In addition, consideration is also given to the method

and period used to determine percentages to apply to aged inventory as a result of changing trends. Net realisable value represents the estimated selling price less all estimated costs of

completion and costs to be incurred in marketing, selling and distribution. Details on the provisions can be found in note 19.

Allowance for doubtful debts

The Group assesses its doubtful debt allowance at each reporting date. Key assumptions applied are the estimated debt recovery rates and the future market conditions that could affect

recovery. Details of the allowance can be found in note 20.

Net investment in foreign operations

Certain loans with the Group’s foreign investments are designated as part of the Group’s net investment as they are not expected to be repaid in the foreseeable future. This results in the

foreign exchange differences on the portion of the loans that are viewed as ‘capital contributed’ being recorded in equity under the Foreign Currency Translation Reserve as required per

IAS 21, The Effects of Changes in Foreign Exchange Rates, as opposed to being recognised in the Income Statement. This designation involved judgement in respect of confirming

intention as well as assessing the appropriate timing of the change. Details on the Group’s foreign exchange risk management can be found in note 40.

Fair value of equity awards granted

The fair value of share awards and options granted in terms of IFRS 2 Share-based Payment have been obtained using the Lattice and Binomial pricing models respectively. Assumptions

include expected volatility, expected life, risk-free rate and expected dividend yield. By obtaining an external valuation from accredited valuers and through consultation with various

financial institutions, management is of the opinion that the risk relating to estimation uncertainty has been mitigated. Details of the valuations can be found in note 29.

Provision for post-retirement medical aid contributions

Post-retirement healthcare benefits are provided to certain retired employees. Actuarial valuations are performed to assess the financial position of the fund. Assumptions used include

the discount rate, healthcare cost inflation, mortality rates, withdrawal rates and membership. By obtaining an external valuation from accredited valuers, management is of the opinion

that the risk relating to estimation uncertainty has been mitigated. Details can be found in note 25 and note 27.

Taxation

The Group is subject to taxes in numerous jurisdictions. Significant estimate is required in determining the worldwide accrual for income taxes. There are many transactions and

calculations during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated uncertain income tax positions

based on best informed estimates of whether additional income taxes will be due. Where the final income tax outcome of these matters is different from the amounts that were initially

recorded, such differences will impact the current income tax and deferred income tax assets and liabilities in the period in which such determination is made. Details of taxation can be

found in note 10.



3. Technical Review

Standards or Interpretations that became effective in the current period

The following new standards and amendments to existing standards were adopted in the current financial reporting period and had no significant effect on the Group’s reported

results:

Standard/Interpretation Amendment Description

IFRS 2 Share -Based Payment Amendments resulting fromAnnual Improvements 2010-2012Cycle (Definitions revised)

The IASB identified the need to clarify the definition of 'vesting conditions' in IFRS 2 to ensure the consistent

classification of conditions attached to a share-based payment. Previously, this IFRS did not separately define a

'performance condition' or a 'service condition', but instead described both concepts within the definition of 'vesting

conditions'. The IASB decided to separate the definitions of a 'performance condition' and a 'service condition' from the

definition of a 'vesting condition' and thus make the description of each condition more clear.

This amendment did not have any financial or disclosure impact on the Group's results.

IFRS 3, Business Combinations Amendments resulting fromAnnual Improvements 2010-2012Cycle (Measurement requirementsfor all contingent assets andliabilities)

The objective of this amendment is to clarify certain aspects of accounting for contingent consideration in a business

combination. The IASB noted that the classification requirements for contingent consideration were unclear as to when

'other applicable IFRSs' would need to be used to determine the classification of contingent consideration as either a

financial liability or an equity instrument. Contingent consideration that is within the scope of IFRS 9 (IAS 39) shall be

measured at fair value at each reporting date with changes in fair value recognised in profit or loss.in accordance with

IFRS 9 (IAS 39). However, if the contingent consideration does not fall within the scope of IFRS 9 (IAS 39) it shall be

measured at fair value at each reporting date with changes recognised in profit or loss.


Amendments resulting fromAnnual Improvements 2011-2013Cycle (Scope paragraph for jointarrangement)

The amendment clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in

the financial statements of the joint arrangement itself.


IFRS 8, Operating Segments Amendments resulting fromAnnual Improvements 2010-2012Cycle (Amendments to disclosurerequirements)

The IASB has issued an amendment to assist in clarifying the aggregation criteria. Operating segments may be

combined/aggregated if aggregation is consistent with the core principle of the standard, if the segments have similar

economic characteristics and if they are similar in other qualitative respects. If they are combined, the entity must

disclose the economic characteristics (e.g. sales and gross margins) used to assess whether the segments are ‘similar’.


The amendment also clarifies that the reconciliation of segment assets to total assets is required to be disclosed only if

the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment

liabilities.


IFRS 13, Fair Value Measurement Amendments resulting fromAnnual Improvements 2010-2012Cycle (Amendments tomeasurement requirements)

The amendments clarify the requirements for those short-term receivables and payables.


Amendments resulting fromAnnual Improvements 2011-2013Cycle (Clarification of portfolioexception)

The scope of the portfolio exception for measuring the fair value of a group of financial assets and liabilities on a net

basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance

with IAS 39 or IFRS 9, regardless of whether they meet the definitions of a financial asset or financial liability as per IAS

32.


IAS 16, Property, Plant andEquipment and IAS 38, IntangibleAssets

Amendments resulting fromAnnual Improvements 2010-2012Cycle (Amendments toRevaluation method)

The objective of this amendment is to clarify the requirements for the revaluation method in IAS 16 Property, Plant and

Equipment and IAS 38 Intangible Assets to address concerns about the calculation of the accumulated depreciation or

amortisation at the date of the revaluation. The IFRS Interpretations Committee reported to the IASB that practice

differed in the calculation of accumulated depreciation for an item of property, plant and equipment that is measured

using the revaluation method in cases where the residual value, the useful life or the depreciation / amortisation

method has been re-estimated before a revaluation.

The amendment clarifies that the carrying amount of an asset is adjusted to that value in one of the following ways:

i) The gross carrying amount is adjusted consistently with the valuation (e.g. change the total or change the carrying

amount to that with accumulated depreciation adjusted proportionately).

ii) The accumulated depreciation or amortisation is eliminated against the gross carrying amount of the asset.


IAS 19, Employee Benefits Amendments for Defined BenefitPlans

The amendment clarifies the requirements that relate to how contributions from employees or third parties that are

linked to service should be attributed to periods of service as a negative benefit. In addition, it permits a practical

expedient if the amount of the contributions is independent of the number of years of service, and those contributions,

can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service

is rendered.


IAS 24, Related Party Disclosure Amendments resulting fromAnnual Improvements 2010-2012Cycle (Definitions and disclosuresrevised)

The definition of related parties includes the entity, or any member of a group of which it is a part, that provides key

management personnel services to the reporting entity or its parent. Details of the individual employee benefits do not

need to be disclosed for an entity that provides key management personnel services. The amounts incurred for key

management personnel services from an entity must be disclosed.


IAS 40, Investment Property Amendments resulting fromAnnual Improvements 2011-2013Cycle (Interrelationship betweenIFRS 3 and IAS 40)

The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied

property (i.e., property, plant and equipment).

The amendment clarifies that IFRS 3, not the description of ancillary services in IAS 40, is used to determine whether the

transaction is the purchase of an asset or business combination.


Standards or Interpretations issued but not yet effective

At the date of authorisation of these financial statements, the following relevant standards were in issue but not yet effective. The Group has elected not to early adopt any of these

standards.

Standard/Interpretation Pronouncement Description Effective Datebeginning on or after

IAS 1 Presentation of FinancialStatements

Disclosure Initiative The amendment provides new requirements when an entity presents subtotals in addition

to those required by IAS 1 in its audited annual financial statements. It also provides

amended guidance concerning the order of presentation of the notes in the audited annual

financial statements, as well as guidance for identifying which accounting policies should

be included. It further clarifies that an entity's share of comprehensive income of an

associate or joint venture under the equity method shall be presented separately into its

share of items that a) will not be reclassified subsequently to profit or loss and b) that will be

reclassified subsequently to profit or loss.

This amendment is not expected to have material disclosure impact on the Group's results.

1 January 2016

IAS 16 Property, Plant andEquipment and IAS 38, IntangibleAssets

Amendments to IAS 16 and IAS 38(Basis fordepreciation/amortisation)

The basis for calculation of depreciation and amortisation should be based on the expected

pattern of consumption of the future economic benefits of an asset.

In estimating the basis of depreciation and amortisation, revenue generation is not

considered to be an appropriate basis for measuring the consumption of economic

benefits.

This amendment is not expected to have any financial or disclosure impact on the Group's

results as revenue-based methods of depreciation and amortisation methods are not in use.

1 January 2016

IAS 19 Employee Benefits Amendments resulting fromAnnual Improvements 2012-2014Cycle (Clarification ofrequirements to determinediscount rate)

The amendment clarifies that market depth of high quality corporate bonds is assessed

based on the currency in which the obligation is denominated, rather than the country

where the obligation is located. When there is no deep market for high quality corporate

bonds in that currency, government bond rates must be used.


results.

1 January 2016

IAS 27 Consolidated and SeparateFinancial Statements

Amendment for use of the equitymethod

The amendment will allow entities to use the equity method to account for the investments

in subsidiaries, joint ventures and associates in the separate financial statements.


results as investments in subsidiaries will continue to be accounted for at cost in the

separate financial statements.

1 January 2016

IAS 34 Interim Financial Reporting Amendments resulting fromAnnual Improvements 2012-2014Cycle (Clarification of disclosure)

The amendment allows an entity to present disclosures required by paragraph 16A either in

the interim audited annual financial statements or by cross reference to another report, for

example, a risk report, provided that other report is available to users of the audited annual

financial statements on the same terms as the interim audited annual financial statements

and at the same time.

This amendment is not expected to have any material disclosure impact on the Group's

results.

1 January 2016

Standard/Interpretation Amendment Description


IFRS 5, Non-current assets Held forSale and Discontinued Operations

Amendments resulting fromAnnual Improvements 2012-2014Cycle (Clarification ofclassification)

The amendment clarifies that non-current assets held for distribution to owners should be

treated consistently with non-current assets held for sale. It further specifies that if a

non-current asset held for sale is reclassified as a non-current asset held for distribution to

owners or vice versa, that the change is considered a continuation of the original plan of

disposal.


results.

1 January 2016

IFRS 7, Financial Instruments:Disclosures

1 January 2016Amendments resulting fromAnnual Improvements 2012-2014Cycle (Clarification of servingcontract)

Amendments resulting fromAnnual Improvements 2012-2014Cycle (Applicability of theoffsetting disclosures tocondensed interim financialstatements)

The amendment clarifies that the offsetting disclosure requirements do not apply to

condensed interim financial statements, unless such disclosures provide a significant

update to the information reported in the most recent annual report.

The amendment provides additional guidance regarding transfers with continuing

involvement. Specifically, it provides that cash flows excludes cash collected which must be

remitted to a transferee. It also provides that when an entity transfers a financial asset but

retains the right to service the asset for a fee, that the entity should apply the existing

guidance to consider whether it has continuing involvement in the asset.

These amendments are not expected to have any financial or disclosure impact on the

Group's results.

IFRS 9 Financial Instruments The IASB has issued the finalversion of IFRS 9, which combinesclassification and measurement,the expected credit lossimpairment model and hedgeaccounting

Financial assets are measured at amortised cost, fair value through profit or loss, or fair value

through other comprehensive income, based on both the entity’s business model for

managing the financial assets and the financial asset’s contractual cash flow characteristics.

Apart from the ‘own credit risk’ requirements, classification and measurement of financial

liabilities is unchanged from existing requirements. Early adoption is permitted. The

impairment requirements in the new standard are based on an expected credit loss model

and replace the IAS 39 incurred loss model. Entities are required to recognise either

12-month or lifetime expected credit losses, depending on whether there has been a

significant increase in credit risk since initial recognition. The measurement of expected

credit losses would reflect a probability-weighted outcome, the time value of money and

reasonable and supportable information. Hedge effectiveness testing must be prospective

and can be qualitative, depending on the complexity of the hedge. A risk component of a

financial or non-financial instrument may be designated as the hedged item if the risk

component is separately identifiable and reliably measureable. The time value of an option,

the forward element of a forward contract and any foreign currency basis spread can be

excluded from the designation as the hedging instrument and accounted for as costs of

hedging. More designations of groups of items as the hedged item are possible, including

layer designations and some net positions.

Management is still assessing the impact that the new standard will have on the

classification of financial assets and impairment assessments. Additional disclosures are

expected. The new standard is not expected to have an impact on the Group’s hedging

transactions.

1 January 2018

IFRS 10, Consolidated FinancialStatements and IAS 28

Sale of Contribution of Assetsbetween an Investor and itsAssociate or Joint Venture

The amendment addresses the inconsistencies between the requirements of IFRS 10

Consolidated Financial Statements and those in IAS 28 dealing with the loss of control of a

subsidiary that is sold or contributed to an associate or joint venture.

The amendments clarify that the gain or loss resulting from the sale or contribution of

assets that constitute a business, as defined in IFRS 3: Business combinations, between an

investor and its associate or joint venture, is recognised in full. Any gain or loss resulting

from the sale or contribution of assets that do not constitute a business, however, is

recognised only to the extent of unrelated investors’ interests in the associate or joint

venture.

This amendment is not expected to have any effect on the Group as the Group currently

has no recognised investments in associates or joint ventures.

1 January 2016

IFRS 11 Joint Arrangements New guidance Requires the acquirer of an interest in a joint operation in which the activity constitutes a

business (as defined in IFRS 3 Business Combinations) to apply all of the principles and

disclosure requirements for business combinations in IFRS 3 and other IFRSs, except where

those principles conflict with the guidance of IFRS 11.

This guidance is not expected to have any financial or disclosure impact on the Group's

results.

1 January 2016

IFRS 10, 12, IAS 28 Investmententities

Investment Entities: Applying theConsolidation Exception

The amendment clarifies the consolidation exemption for investment entities. It further

specifies that an investment entity which measures all of its subsidiaries at fair value is

required to comply with the "investment entity" disclosures provided in IFRS 12. The

amendment also specifies that if an entity is itself not an investment entity and it has an

investment in an associate or joint venture which is an investment entity, then the entity

may retain the fair value measurement applied by such associate or joint venture to any of

their subsidiaries.

This guidance is not expected to have any financial or disclosure impact on the Group's

results.

1 January 2016

IFRS 15 Revenue from Contractsfrom Customers

New standard IFRS 15 establishes a single, comprehensive framework for determining when to recognise

revenue and the amount of revenue to be recognised. IFRS 15 replaces the previous

revenue standards IAS 18 Revenue and IAS 11 Construction Contracts and the related

interpretations IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the

Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC-31 Revenue

–Barter Transactions Involving Advertising Services. The new standard:

• improves the comparability of revenue from contracts with customers,

• reduces the need for interpretive guidance to address emerging revenue recognition

issues, and

• provides more useful information through improved disclosure requirements.

The standard outlines the principles an entity must apply to measure and recognise

revenue. The core principle is that an entity will recognise revenue at an amount that

reflects the consideration to which the entity expects to be entitled in exchange for

transferring goods or services to a customer.

The principles in IFRS 15 will be applied using a five-step model:

1. Identify the contract(s) with a customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations in the contract

5. Recognise revenue when (or as) the entity satisfies a performance obligation

In addition to the five-step model, the standard also specifies how to account for the

incremental costs of obtaining a contract and the costs directly related to fulfilling a

contract. Application guidance is provided in the standard to assist entities in applying its

requirements to determining the consideration paid to a customer (particularly with regard

to slotting fee arrangements and co-operative advertising arrangements), variable

consideration, common arrangements, including licences, warranties, rights of return,

principal-versus-agent considerations, options for additional goods or services, and

breakage.

The new standard is more prescriptive than current IFRS and the disclosure requirements

are more extensive. Management is still assessing the impact that the new standard will

have on the Group’s recognition of revenue, and additional disclosure is expected.

The changes to the accounting for revenue would primarily impact revenue recognition

from services, which is not significant for the Group, however revenue from sale of goods

may be significantly impacted as a result of accounting for expected customer returns. The

Group is still in the process of analysing the full impact of this new standard.

1 January 2018

IFRS 16 Leases New standard IFRS 16 will require lessees to recognise most leases on their balance sheets as lease

liabilities with corresponding right-of-use assets, similar to what is currently done for finance

leases. Lessees will however be permitted to make an accounting policy election, by class of

underlying asset, to apply a method like IAS 17’s operating lease accounting and not

recognise lease assets and lease liabilities for leases with a lease term of 12 months or less.

Lessees will also be permitted to make an election, on a lease-by-lease basis, to apply a

method similar to current operating lease accounting to leases for which the underlying

asset is of a low value. The accounting by lessors under the new standard is substantially

unchanged from today’s accounting.

The Group is still in the process of analysing the impact of this new standard.

1 January 2019




4. Acquisition of subsidiaries and businesses

Subsidiaries and businesses acquiredPurchasing Principal Date of Control

December 2015 Division activity acquisition acquired

Unison Risk Management Alliance Proprietary Limited Corporate Insurance broking 5 November 2015 100%

Powersave and Savemore Masscash Merchandising and food 23 March 2015 100%

Liquormart Ladysmith Massdiscounters Liquor store 6 August 2015 100%

Liquormart Mokopane Massdiscounters Liquor store 16 August 2015 100%

All of the above were accounted for as business combinations.

Purchasing Principal Date of Control

December 2014 Division activity acquisition acquired

Micawber 269 Proprietary Limited Corporate Property Company 15 October 2014 100%

Rospall Investments Proprietary Limited Corporate Property Company 31 July 2014 100%

Darryl Investments Proprietary Limited Corporate Property Company 1 August 2014 100%

Mikeva Cash & Carry Proprietary Limited Masscash Wholesale Company 28 April 2014 55%

Mikeva Cash & Carry Proprietary Limited was accounted for as a business combination and all of the other subsidiary acquisitions were accounted for as asset acquisitions.

Fair value analysis of the assets and liabilities acquired

The net fair value of the assets acquired and liabilities assumed during the current financial year was R38.5 million (December 2014: R592.4 million) on the date of acquisition.

Net cash outflow on acquisitionDecember 2015 December 2014

Rm 52 weeks 52 weeks

Total purchase price (38.5) (564.4)

Less: Cash and cash equivalents of subsidiaries 21.6 -

Net cash position for the Group (16.9) (564.4)

A cash outflow of R38.5 million in the current financial year for the acquisition of the above-mentioned companies can be found in note 38.8.

A cash outflow of R552.9 million in the prior financial year, relates to the acquisition of Micawber 269 Proprietary Limited, Rospall Investments Proprietary Limited and Darryl Investments

Proprietary Limited. This net cash outflow for the asset acquisitions can be found in note 38.5. The acquisition of Mikeva Cash & Carry Proprietary Limited for R11.5 million can be found in

note 38.8. A liability was raised on the asset acquisition of Micawber 269 Proprietary Limited in the prior financial year for R11.6 million. For further information regarding the liabilities raised refer tonote 27.

Goodwill arising on acquisition of businesses

In the current financial year upon the acquistion of Unison Risk Management Alliance Proprietary Limited, goodwill of R0.6 million arose. In addition, the acquisition of liquor businesses

within the Massdiscounters Division resulted in goodwill of R6.7 million and the acquistion of general merchandising and food businesses within the Masscash Division goodwill of a

further R36.6 million. These business combinations are not considered to be significant.

In the prior financial year upon the acquisition of Mikeva Cash & Carry Proprietary Limited, within the Masscash Division, goodwill of R9.7 million arose. In addition, the acquisition of liquor

businesses within the Massdiscounters Division resulted in goodwill of R2.4 million. These business combinations are not considered to be significant.



5. Revenue



Sales 84,731.8 78,173.2

Other income 125.6 145.8

- Change in fair value of financial assets carried at fair value through profit or loss 14.2 24.8

- Dividends from unlisted investments 40.3 0.3

- Royalties and franchise fees - 80.1

- Management and administration fees 1.5 0.7

- Property rentals 11.1 27.6

- Commissions and fees - 2.7

- Distribution income 9.5 7.9

- Other 49.0 1.7

84,857.4 78,319.0

Additional information on financial assets carried at fair value through profit or loss can be found in note 16.

‘Royalties and franchise fees’ and ‘Commissons and fees’ have been reclassified to sales prospectively in the current financial year.

Included within ‘other’ is the gain on forgiveness of a liability included in trade and other payables of R32.3 million.

1

2

2

3

1

2

3



6. Impairment of assets



Freehold land and buildings 13 16.0 9.4

Leasehold improvements 13 3.8 9.0

Fixtures, fittings, plant and equipment 13 5.7 6.2

Computer hardware 13 0.2 -

25.7 24.6

The impairment of the land and buildings in the current and prior financial year relates to a property reclassified to non-current asset held for sale where

the recoverable amount was determined as its fair value less costs of disposals based on the amount that could be received on selling the property (level 3

valuation). Additional information can be found in note 14 and note 21.

The impairment of the leasehold improvements and fixtures, fittings, plant and equipment in the current and prior financial year relates to the closure of

stores in the Masscash Division, where the recoverable amounts were determined as fair value less costs of disposals based on the amount that could be

received on selling the items (level 3 valuation).

1

2

2

1

2



7. Foreign exchange loss



Foreign exchange loss from loans to African operations (93.7) (35.0)

Foreign currency translation reserve re-classified to the Income Statement 12.7 -

Foreign exchange gain arising from an investment in a trading and logistics structure (note 16) - 4.8

Foreign exchange loss arising from the translation of foreign creditors (68.8) (19.6)

Total (149.8) (49.8)

Foreign exchange currency exposures and rates

Spot rate Spot rate

Jurisdiction Currency December 2015 December 2014

United States USD 15.2274 11.5995

United Kingdom Pound Sterling 22.5926 18.0449

European Union Euro 16.7150 14.1944

Botswana Botswana Pula 1.3741 1.2157

Ghana Ghanaian New Cedi 3.9920 3.6107

Kenya Kenyan Shilling 0.1488 0.1281

Malawi Malawian Kwacha 0.0234 0.0249

Mauritius Mauritian Rupee 0.4236 0.3684

Mozambique Mozambican New Metical 0.3145 0.3458

Nigeria Nigerian Naira 0.0765 0.0634

Tanzania Tanzanian Shilling 0.0071 0.0068

Uganda Uganda Shilling 0.0045 0.0042

Zambia Zambian New Kwacha 1.3893 1.8265

The Group also operates in Lesotho, Namibia and Swaziland. The Lesotho Loti, the Namibian Dollar and Swazi Lilangeni are pegged to the Rand on a 1:1 basis, therefore, there is no

foreign exchange exposure relating to these currencies.

Foreign exchange loss from loans to African operations

Massdiscounters, Massbuild and Masscash have provided Rand denominated loans to their African operations which are then maintained as working capital loans. These loans attract

foreign exchange gains/(losses) in the African operations when translated into the functional currency of those operations at year end. Where the operations hold other monetary

balances not in their functional currency, those balances also attract foreign exchange gains/(losses) when translated into functional currency at year end.

In addition, through a Mauritian entity, the Group lends its African operations local currency denominated loans as start-up capital. These loans attract foreign exchange gains/(losses) in

the Mauritian entity when translated into USD, its functional currency, at year end. Currently, it is the Group’s policy to naturally hedge these loans by lending to its subsidiaries in various

African countries in various African currencies, thereby spreading its foreign exchange exposure across a broad basket of currencies. In addition, the Group limits its exposure to any one

currency by funding a portion of the start-up capital via in-country bank loans. Refer to note 28 for more information on these foreign bank loans.

The African operations trade in their local currency, which for reporting purposes is also their functional currency. The foreign exchange gains/(losses) that arises when translating the

foreign operation into Rands (the Group’s presentation currency) is accounted for in the foreign currency translation reserve on the Statement of Financial Position. Additional information

on these translations can be found in note 23.

At 1 March 2015 the Group reassessed the designation of a number of its intercompany loans to its foreign operations in Africa, as per IAS 21 The Effects of Changes in Foreign Exchange

Rates. As a result, certain loans were designated as part of the Group’s net investment in these foreign operations and the associated foreign exchange gains/(losses) have been

recognised in the foreign currency translation reserve.

Foreign exchange loss arising from the translation of foreign creditors

Foreign creditors resulting from foreign stock purchases and transactions with the ultimate holding company, being Wal-Mart Stores, Inc., are foreign currency denominated and upon

translation into the Group’s functional currency at year end, exchange differences arise on translation into Rands at year end. As the bulk of foreign creditors and transactions with

Wal-Mart Stores, Inc. are recorded in USD’s, this exchange difference can in most part be explained by the movement of the Rand against the USD. As the Rand weakened in both periods,

this resulted in an exchange loss in both periods.

All of the foreign exchange gains/(losses) referred to above, other than those relating to the Group’s net investment in its foreign operatings, are recognised in the Income Statement.

1

2

1

2

Foreign exchange loss arising from FEC’s

The Group uses foreign exchange forward contracts (FEC’s) to hedge its exposure to foreign currency fluctuations relating to all firm trading commitments in respect of foreign stock

purchases as mentioned in point 2 above. The foreign exchange movements that arise from the hedges are recognised in the Income Statement when they become ineffective or for

effective hedges when the firm commitment is terminated resulting in the FEC being cancelled. The impact of ineffective hedges and cancelled hedges during the current and prior year,

was insignificant. Once the FECs are de-designated as hedging instruments, movements in the fair value of the FECs are recognised in cost of sales in the Income Statement. Upon expiry

of the FECs, the net cumulative gain or loss recognised in other comprehensive income is transferred to cost of sales in the Income Statement. For more information on this net

cumulative gains/(losses) subsequently transferred to the Income Statement refer to note 23.

For more information on the Group’s currency risk management policy refer to note 40.



8. Operating profit before interest



CREDITS TO OPERATING PROFIT BEFORE INTEREST INCLUDE:Profit on disposal of tangible and intangible assets and non- current assets held for sale 14.8 10.4

CHARGES TO OPERATING PROFIT BEFORE INTEREST INCLUDE:Depreciation and amortisation (owned assets): 934.0 829.5

- Buildings 13 52.2 35.5

- Leasehold improvements 13 60.6 55.5

- Fixtures, fittings, plant and equipment 13 557.1 505.2

- Computer hardware 13 77.3 72.6

- Motor vehicles 13 54.2 46.6

- Computer software 15 127.1 108.8

- Right of use 15 5.1 4.9

- Trademarks 15 0.4 0.4

Depreciation and amortisation (leased assets): 12.2 17.1

- Buildings 13 - 1.6

- Fixtures, fittings, plant and equipment 13 0.2 2.5

- Computer hardware 13 2.8 3.6

- Motor vehicles 13 9.2 9.4

Share-based payment expense: 218.5 127.9

- Massmart Holdings Limited Employee Share Trust 29 194.7 106.7

- Massmart Black Scarce Skills Trust 29 23.8 21.2

Operating lease charges: 2,093.0 1,917.9

- Land and buildings 1,975.5 1,811.7

- Plant and equipment 86.3 74.6

- Computer hardware 1.3 1.4

- Motor vehicles 29.9 30.2

Loss on disposal of tangible and intangible assets 11.9 11.8

Fees: 149.2 126.6

- Administrative and outsourcing services 111.1 93.5

- Consulting 38.1 33.1

Auditors’ remuneration: 23.1 22.2

- Current year fee 23.1 22.2

Professional fees 7.3 2.1



9. Net finance costs



Finance costs (507.7) (386.8)

- Interest on bank overdrafts and loans (506.3) (382.4)

- Interest on obligations under finance leases (1.4) (4.4)

Finance income 32.4 41.5

- Income from investments, bank accounts and other financial assets 32.4 41.5

Net finance costs (475.3) (345.3)

Additional information on bank overdrafts, loans and finance leases can be found in note 24 and note 28.

Additional information on investments and other financial assets can be found in note 16 and note 17.



10. Taxation



CURRENT YEAR

South African normal taxation:

Current taxation 465.6 414.7

Deferred taxation (56.4) (54.4)

Foreign taxation:


Deferred taxation (25.8) 16.9

Withholding tax 35.0 9.9

Taxation effect of participation in export partnerships 1.4 0.5

488.7 460.8

PRIOR YEAR UNDER/(OVER) PROVISION

South African normal taxation:



Foreign taxation:


Deferred taxation 9.6 12.8

Withholding tax 0.5 -

Taxation effect of participation in export partnerships - (2.5)

17.2 22.6

Taxation as reflected in the Income Statement 505.9 483.4

The withholding tax relates to interest and dividends paid by foreign controlled entities.

Two companies in the Group participate in Trencor export partnerships. As the companies are liable for the tax effect of the participation, the amount is classified as a taxation charge.

Additional information on the export partnership can be found in note 16.


% 52 weeks 52 weeks

The rate of taxation is reconciled as follows:

Standard corporate taxation rate 28.0 28.0

Exempt income (0.3) (0.1)

Disallowable expenditure 1.3 3.2

Foreign income 0.5 1.1

Prior year under-provision 0.5 1.3

Allowances on lease premiums and improvements (0.2) (0.1)

Assessed loss not utilised 2.6 2.0

Withholding tax 0.5 (1.1)

Other (2.7) (4.5)

30.2 29.8

‘Other’ includes such items as differences in foreign tax rates and capital gains tax.

1

2

1

2

1

2

3

3



11. Dividends paid to shareholders



Final cash dividend No 30 (2014: No 28) 597.1 597.0

Interim cash dividend No 31 (2014: No 29) 317.0 317.0

Total dividends paid 914.1 914.0

Dividend/distribution per share (cents)

Interim 146.0 146.0

Final 275.0 275.0

Total 421.0 421.0

No 28 of 275.0 cents declared on 26 February 2014 and paid on 24 March 2014 (R597.0 million).

No 29 of 146.0 cents declared on 27 August 2014 and paid on 22 September 2014 (R317.0 million).


No 31 of 146.0 cents declared on 26 August 2015 and paid on 21 September 2015 (R317.0 million).


Withholding tax of 15% was applied to the dividends declared on 25 February 2015 and paid on 23 March 2015 and the dividends declared on 26 August

2015 and paid on 21 September 2015. Withholding tax applied to the dividend declared on 24 February 2016 and paid on 22 March 2016, will be

accounted for in the next financial year. The Group was acting as an agent with regards to the withholding tax paid on behalf of shareholders on dividends

declared and as such, withholding tax has been included in the total amount of the dividend paid.



12. Earnings per share


Earnings per share (cents) 52 weeks 52 weeks

Basic EPS 513.5 497.8

Diluted basic EPS 506.1 492.9

Headline EPS 516.3 509.7

Headline EPS before foreign exchange movements (taxed) 567.5 526.2

Diluted headline EPS 508.8 504.7

Diluted headline EPS before foreign exchange movements (taxed) 559.3 521.1


Ordinary shares (number) 52 weeks 52 weeks

In issue 217,136,334 217,118,072

Weighted average 216,688,802 216,907,568

Diluted weighted average 219,892,860 219,054,983

Headline earnings per share

The calculation of headline earnings per share is based on the weighted average number of ordinary shares. The calculation is reconciled as follows:



Profit for the year attributable to owners of the parent 1,112.8 1,079.8

Adjustments after non-controlling interest:

Impairment of assets (note 6) 25.7 24.6

Taxation on impairment of assets (2.7) -

Net loss on disposal of tangible and intangible assets 2.3 1.4

Taxation on disposal of tangible assets and intangible assets (1.6) (0.3)

Profit on sale of non-current assets classified as held for sale (5.2) -

Taxation on profit on sale of non-current assets classified as held for sale 1.1 -

Compensation from 3rd parties for tangible assets that were impaired, lost or given up (1.2) -

Taxation on compensation from 3rd parties for tangible assets that were impaired, lost or given up 0.3 -

Foreign currency translation reserve re-classified to the Income Statement (12.7) -

Headline earnings 1,118.8 1,105.5

Foreign exchange loss (taxed) 111.0 35.9

Headline earnings before foreign exchange movements (taxed) 1,229.8 1,141.4

The tax on the foreign exchange loss was R51.5 million (Dec 2014: R13.9 million).

Diluted attributable earnings and headline earnings per share

The calculation of diluted attributable earnings and headline earnings per share is based on the weighted average number of ordinary shares. The calculation is reconciled as follows:

December 2015 December 2014 December 2015 December 2014

52 weeks 52 weeks 52 weeks 52 weeks

Rm Rm Cents/share Cents/share

Profit attributable to the owners of the parent 1,112.8 1,079.8 513.5 497.8

Adjustment for impact of issuing ordinary shares - - (7.4) (4.9)

Diluted attributable earnings 1,112.8 1,079.8 506.1 492.9

Headline earnings 1,118.8 1,105.5 516.3 509.7

Adjustment for impact of issuing ordinary shares - - (7.5) (5.0)

Diluted headline earnings 1,118.8 1,105.5 508.8 504.7

Diluted headline earnings before foreign exchange movements (taxed) 1,229.8 1,141.4 559.3 521.1

Weighted average shares outstanding

No. of shares December 2015 December 2014

Weighted average shares outstanding for basic and headline earnings per share 216,688,802 216,907,568

Potentially dilutive ordinary shares resulting from outstanding options and awards 3,204,058 2,147,415

Weighted average shares outstanding for diluted basic and diluted headline earnings per share 219,892,860 219,054,983

Majority of the dilutive impact arises from the Employee Share Incentive Plan introduced during 2013. The Black Scarce Skills ‘B’ preference shares have a small effect on diluted basic and

diluted headline earnings per share in the current year. For more information on these Schemes refer to note 29.



13. Property, plant and equipment

December 2015

Cost

Accumulated

depreciation

and

impairment

Net book

valueRm

Owned assets

Freehold land and buildings 3,811.6 (161.8) 3,649.8

Leasehold improvements 923.4 (350.9) 572.5

Fixtures, fittings, plant and equipment 6,168.6 (2,812.5) 3,356.1

Computer hardware 755.9 (414.7) 341.2

Motor vehicles 341.3 (160.9) 180.4

Total 12,000.8 (3,900.8) 8,100.0

Capitalised leased assets

Fixtures, fittings, plant and equipment 1.3 (0.4) 0.9


Motor vehicles 38.1 (21.4) 16.7

Total 52.7 (34.9) 17.8

Total property, plant and equipment 12,053.5 (3,935.7) 8,117.8

December 2014

Cost

Accumulated

depreciation

and

impairment

Net book

valueRm

Owned assets

Freehold land and buildings 3,418.0 (108.4) 3,309.6

Leasehold improvements 814.8 (310.7) 504.1

Fixtures, fittings, plant and equipment 5,297.7 (2,362.1) 2,935.6


Motor vehicles 323.4 (134.5) 188.9

Total 10,512.8 (3,295.8) 7,217.0

Capitalised leased assets

Freehold land and buildings 19.7 (19.7) -

Fixtures, fittings, plant and equipment 1.4 (0.2) 1.2


Motor vehicles 36.0 (18.0) 18.0

70.6 (48.4) 22.2

Total property, plant and equipment 10,583.4 (3,344.2) 7,239.2

Certain capitalised leased property, plant and equipment is encumbered as per note 24 and note 28.

Reconciliation of property, plant and equipment

December 2015 Openingnet book

valueAdditions

Additionsthrough

acquisitionsDisposals Depreciation

Foreignexchange

gain/(loss)Reclassifications Impairment

Classified asheld for sale

Closingnet book

valueRm

Owned assets

Freehold land andbuildings

3,309.6 474.5 - (7.8) (52.2) (17.9) (28.9) (16.0) (11.5) 3,649.8

Leaseholdimprovements

504.1 156.1 - (2.1) (60.6) (5.6) (15.6) (3.8) - 572.5

Fixtures, fittings, plantand equipment

2,935.6 939.9 0.6 (5.1) (557.1) 6.9 41.0 (5.7) - 3,356.1

Computer hardware 278.8 136.4 0.4 (0.2) (77.3) 0.4 2.9 (0.2) - 341.2

Motor vehicles 188.9 69.8 - (24.7) (54.2) 0.3 0.3 - - 180.4

Total 7,217.0 1,776.7 1.0 (39.9) (801.4) (15.9) (0.3) (25.7) (11.5) 8,100.0

Capitalised leased

assetsFixtures, fittings, plantand equipment

1.2 - - (0.1) (0.2) - - - - 0.9

Computer hardware 3.0 - - - (2.8) - - - - 0.2

Motor vehicles 18.0 9.2 - (1.3) (9.2) - - - - 16.7

Total 22.2 9.2 - (1.4) (12.2) - - - - 17.8

Total property,

plant and

equipment

7,239.2 1,785.9 1.0 (41.3) (813.6) (15.9) (0.3) (25.7) (11.5) 8,117.8

December 2014 Opening

net book

value Additions

Additions

through

acquisitions Disposals Depreciation

Foreign

exchange

gain Reclassifications Impairment

Classified as

held for sale

Closing

net book

valueRm

Owned assets


2,375.1 397.2 606.4 (3.6) (35.5) (2.6) - (9.4) (18.0) 3,309.6

Leaseholdimprovements

468.8 103.6 - (2.0) (55.5) (1.8) - (9.0) - 504.1


2,679.4 768.6 1.2 (17.6) (505.2) (5.7) 21.1 (6.2) - 2,935.6

Computer hardware 232.7 120.3 - (0.6) (72.6) (1.0) - - - 278.8

Motor vehicles 133.5 89.0 0.3 (8.7) (46.6) (0.3) 21.7 - - 188.9

Total 5,889.5 1,478.7 607.9 (32.5) (715.4) (11.4) 42.8 (24.6) (18.0) 7,217.0

Capitalised leased

assets


31.4 - (29.8) - (1.6) - - - - -


24.4 0.3 - - (2.5) 0.1 (21.1) - - 1.2

Computer hardware 6.3 0.4 - - (3.6) (0.1) - - - 3.0

Motor vehicles 36.5 14.1 - (1.4) (9.4) (0.1) (21.7) - - 18.0

Total 98.6 14.8 (29.8) (1.4) (17.1) (0.1) (42.8) - - 22.2

Total property,

plant and

equipment

5,988.1 1,493.5 578.1 (33.9) (732.5) (11.5) - (24.6) (18.0) 7,239.2

The Group has reviewed the residual values and useful lives of these tangible assets. No significant adjustment resulted from such review in the current financial year.

Additions arose in the current and prior financial year as a result of new store openings and improvements to exisiting stores. The acquisition of ‘freehold land and buildings’ in the prior

financial year relates to three asset acquisitions, refer to note 4, which have all been included as part of ‘Investment to expand operations’ in note 38.5. Also included in the asset

acquisitions in the prior year was a property that was previously leased in terms of a finance lease by the Group, resulting in the transfer of ‘freehold land and buildings ‘ from the

capitalised leased assets to owned assets. The impairment in the current and prior financial year relates to the impairment of owned assets in Masscash as a result of store closures and before the transfer of properties tonon-current assets held for sale. Additional information can be found in note 6. Borrowing costs of R8 million (December 2014: R12 million) were capitalised at an average rate of 6.92% (December 2014: 6.88%) in the current financial year in the Masswarehouse,Massbuild and Massdiscounters Divisions.

Refer to note 31 for capital commitments.



14. Goodwill

Reconciliation of goodwill

Rm December 2015 December 2014

Balance at the beginning of the year 2,542.9 2,532.0

Additions through acquisitions 43.9 12.1

Foreign exchange gain/(loss) 2.6 (1.2)

2,589.4 2,542.9

Carrying amount of significant goodwill


Masscash 1,131.2 1,095.5

Massbuild Proprietary Limited 901.3 901.5

The Fruit Spot Proprietary Limited 173.9 173.9

Rhino Cash and Carry Group 321.3 321.3

Majority of the increase of goodwill in the current financial year relates to the acquisition of general merchandising, food and liquor businesses in Masscash and Massdiscounters

respectively. The increase of goodwill in the prior financial year relates to the acquisition of fresh and liquor businesses in Masscash and Massdiscounters respectively. Additional

information can be found in note 4.

No disposals occured in Massbuild Proprietary Ltd in the current financial year. The movement in goodwill relates to the translation of goodwill from its functional currency to its

presentation currency through the foreign currency translation reserve. Additional information can be found in note 23.

Goodwill is assessed for impairment at a CGU level. This basis represents the lowest level at which management monitors goodwill. The recoverable amounts of the CGU’s have been

based on value in use.

The key assumptions for the value in use calculations are sales growth, trading margin, discount and terminal growth rates. Management estimates discount rates using rates that reflect

current market assumptions of the time value of money and the risks specific to the CGUs. The growth rates are based on the retail industry growth forecasts, with the other key

assumptions within the models being interdependent, and following the known logical principles inherent within the retail and wholesale market.

A change to the underlying assumptions with Masscash such as a 4% reduction in the sales growth or a 2% reduction in the gross margin, could result in an impairment. No significant

impairment loss would result from a reasonable change to the assumptions applied in testing of goodwill in the other CGUs.

The Group prepares cash flow forecasts based on the CGUs’ results for the next five financial years. A terminal value is calculated based on a conservative growth rate of 3.0% – 6.0%

(December 2014: 3.0%). This rate does not exceed the average long-term growth rate for the retail market. The valuation method applied is consistent with that applied in the prior

financial year.

The rate used to discount the forecast cash flows is 13.7% (December 2014: 11.9%) due to increased gearing and an incorporation of a retail risk premium.

No significant impairment loss would result from a reasonable change to the assumptions applied in testing goodwill in the prior year.

1

2

1

2



15. Other intangible assets

December 2015

Cost

Accumulated

amortisation and

impairment Net book valueRm

Owned assets

Computer software 984.6 (603.0) 381.6

Right of use 50.7 (22.7) 28.0

Trademarks 4.1 (4.0) 0.1

1,039.4 (629.7) 409.7

December 2014

Cost

Accumulated

amortisation and

impairment Net book valueRm

Owned assets

Computer software 867.7 (485.2) 382.5

Right of use 50.5 (17.7) 32.8

Trademarks 4.4 (3.9) 0.5

922.6 (506.8) 415.8

December 2015 Opening netbook value

Additions Disposals Amortisation ReclassificationsClosing net book

valueRm

Owned assets

Computer software 382.5 126.3 (0.3) (127.1) 0.2 381.6

Right of use 32.8 0.2 - (5.1) 0.1 28.0

Trademarks 0.5 - - (0.4) - 0.1

415.8 126.5 (0.3) (132.6) 0.3 409.7

December 2014Opening net

book value Additions Disposals Amortisation ReclassificationsClosing net book

valueRm

Owned assets

Computer software 359.8 131.5 - (108.8) - 382.5

Right of use 36.1 1.6 - (4.9) - 32.8

Trademarks 0.9 - - (0.4) - 0.5

396.8 133.1 - (114.1) - 415.8

The Group has reviewed the useful lives of these intangible assets and there were no significant adjustments in the current financial year.

Additions arose in the current and prior financial year as a result of new store openings and new software rollouts.

‘Right of use’ intangible assets are in respect of payments to previous lessees in order to secure sites.

For more information on the Group’s capital commitments, refer to note 31.



16. Investments


Financial assets designated as at fair value through profit or loss (FVTPL)

Unlisted investments 139.3 125.2

- Investment in insurance cell-captive on extended warranties 56.2 56.1

- Investment in insurance cell-captive on premium contributions 83.0 69.0

- Investment in insurance cell-captive on credit life 0.1 0.1

Total fair value through profit or loss 139.3 125.2


Participation in export partnership – Trencor 1.3 1.7

Total loans and receivables 1.3 1.7


Listed investments 4.9 8.4

Total available- for- sale investments 4.9 8.4

Total investments 145.5 135.3

For more information on fair value disclosure, refer to note 39.

Reconciliation of financial assets carried at fair value through profit or loss


Opening balance 125.2 217.7

Fair value adjustments taken to the Income Statement 14.1 19.9

Interest on investment taken to finance income - 0.1

Realisation of the investment in the trading and logistics structure recognised in cash reserves - (117.4)

Foreign exchange gains taken to the Income Statement (note 7) - 4.8

Capital contribution made to the investment in insurance cell-captives - 0.1

139.3 125.2

Further details on the investments in this category:

The Group sells extended warranties through this vehicle facilitated by Mutual & Federal.

The Group places general insurance through this vehicle facilitated by Mutual & Federal.

The Group will sell credit life insurance through this vehicle by arrangement with Guardrisk. The cell arrangement was capitalised in the prior year with no life products sold during the

current or prior financial year.

1

2

3

1

2

3

Reconciliation of loans and receivables



Investment realised (0.4) (0.4)

1.3 1.7


During the current and prior financial year certain Divisions participated in export partnerships, whose business is the purchase and export sale of marine containers. The participations are

accounted for as loans receivables and generally mature over 10 to 15 years. Interest is earned at variable interest rates.

For more information on the credit risk management of loans and receivables, refer to note 40.

Reconciliation of available-for-sale investments



Fair value adjustment (3.5) (3.7)

4.9 8.4


Listed investments include shares held on the Johannesburg Stock Exchange and the Zimbabwe Stock Exchange.



17. Other financial assets


Employee Share Trust Loans to the Executive Directors and other employees of Massmart Holdings Limited:

Balance at the beginning of the year 37.6 46.7

Advanced during the year 0.5 1.2

Repayments (19.2) (10.3)

18.9 37.6

Less: included in other current financial assets - (15.1)

Balance at the end of the year 18.9 22.5

Other loans:

Housing and staff loans 0.7 0.4

19.6 22.9


For more information on the Group’s credit risk management, refer to note 40.

All housing and staff loans bear interest at various fixed rates below the prime interest rate. The Employee Share Trust Loans to Executive Directors and other employees of the Company

are non-interest bearing and are secured by the underlying ordinary shares in Massmart Holdings Limited. The loans are repayable 10 years after the grant date. Recourse is not limited to

these shares and should shares sold to repay these loans be insufficient to recover the balance outstanding, the unrecovered portion remains a debt due and payable. 277,145 (December

2014: 619,443) shares with a market value of R28,601,364 (December 2014: R89,156,431) have been pledged.

Details of the Employee Share Trust loans to the Executive Directors and members of the Executive Committee of the Company:

Pattison, Hayward, Other

employeesGM GRC Total

Rm Rm Rm Rm

December 2015

Balance at the beginning of the year 15.1 13.0 9.5 37.6

Advanced during the year - 0.3 0.2 0.5

Repayments (15.1) (0.6) (3.5) (19.2)

Balance at the end of the year - 12.7 6.2 18.9

December 2014

Balance at the beginning of the year 23.1 13.4 10.2 46.7

Advanced during the year 0.6 0.3 0.3 1.2

Repayments (8.6) (0.7) (1.0) (10.3)

Balance at the end of the year 15.1 13.0 9.5 37.6



17.1. Other current financial assets


Employee Share Trust Loans to the Executive Directors and members of the Executive Committee of Massmart Holdings Limited - 15.1

Property loan - 214.2

- 229.3


For more information on the Group’s credit risk management, refer to note 40.

The Employee Share Trust Loans to Executive Directors and members of the Executive Committee of the Company are non-interest bearing and are secured by the underlying ordinary

shares in Massmart Holdings Limited. The current portion in the prior financial year reflected above relates to Grant Pattison’s loan that was transferred to current upon his resignation. The

long-term portion of these loans, have been accounted for in note 17.

The property loan was realised in the current financial year when the Makro store to which it related transfered to the Group in February 2015. The property loan accrued interest at a fixed

rate of 9.2% (December 2014: 9.2%) and was secured by a mortgage bond.



18. Deferred taxation


The movements during the year are analysed as follows:

Net asset at the beginning of the year 600.9 585.5

Credit to the Income Statement (including foreign exchange movements) 76.9 26.0

Credit to Other comprehensive income (2.1) 0.4

Acquisition of subsidiaries (note 4) - (7.2)

Credit to the Statement of Changes in Equity (note 23) - (3.8)

Net asset at the end of the year 675.7 600.9

Deferred taxation balances are presented in the Statement of Financial Position as follows:

Deferred taxation assets 749.2 662.2

Deferred taxation liabilities (73.5) (61.3)

675.7 600.9

Opening

balance

Credit/(charge)

to the Income

Statement

Credit/ (charge) to

Other

comprehensive

income

Credit to the

Statement of

Changes in

Equity

Acquisition of

subsidiaries

Foreign exchange

movementsClosing balance

Rm

December 2015

Temporary differences

Trademarks 0.8 - - - - - 0.8

Assessed loss unutilised 257.1 52.5 - - - (4.2) 305.4

Export partnerships (1.8) 0.4 - - - - (1.4)

Debtors provisions 24.0 1.3 - - - (0.1) 25.2

Prepayments (24.8) (1.6) - - - 0.1 (26.3)

Short-term provisions 225.8 26.7 - - - (1.2) 251.3

Property, plant and equipment (240.0) (67.2) - - - (5.3) (312.5)

Finance leases (4.3) 4.4 - - - - 0.1

Long-term provisions 77.2 (8.7) - - - - 68.5

Income not accrued - (4.3) - - - - (4.3)

Deferred income 73.8 (6.5) - - - (1.1) 66.2

Operating lease adjustment 280.5 38.3 - - - (0.7) 318.1

Other temporary differences (67.4) 45.7 (2.1) - - 8.4 (15.4)

Total 600.9 81.0 (2.1) - - (4.1) 675.7

1

Opening

balance

Credit/(charge)

to the Income

Statement

Credit to Other

Comprehensive

Income

Credit to the

Statement of

Changes in

Equity

Acquisition of

subsidiaries

Foreign exchange

movementsClosing balance

Rm

December 2014

Temporary differences

Trademarks 0.8 - - - - - 0.8

Assessed loss unutilised 273.3 (16.3) - - - 0.1 257.1

Export partnerships (2.3) 0.5 - - - - (1.8)

Debtors provisions 21.3 2.8 - - - (0.1) 24.0

Prepayments (17.6) (7.2) - - - - (24.8)

Short-term provisions 173.0 51.2 - - 1.8 (0.2) 225.8

Property, plant and equipment (191.3) (39.9) - - (9.0) 0.2 (240.0)

Finance leases (6.1) 1.8 - - - - (4.3)

Long-term provisions 80.4 (3.2) - - - - 77.2

Income not accrued (1.0) 1.0 - - - - -

Deferred income 50.8 23.0 - - - - 73.8

Operating lease adjustment 254.4 26.1 - - - - 280.5

Other temporary differences (50.2) (14.2) 0.4 (3.8) - 0.4 (67.4)

Total 585.5 25.6 0.4 (3.8) (7.2) 0.4 600.9

‘Other temporary differences’ consists of deferred tax raised on lease premiums, share- based payments, foreign exchange movements, S24C allowance amongst other insignificant items.

Deferred tax assets have not been recognised for assessed losses to the value of R582.3 million (December 2014: R411.4 million). Had a deferred tax asset been raised, the year end asset

value would have increased by R159.7 million (December 2014: R112.7 million).

The Group offsets tax assets and liabilities if, and only if, it has a legally enforceable right to set off current tax assets and current tax liabilities, and the deferred tax assets and deferred tax

liabilities relate to income taxes levied by the same tax authority on the same legal entity.

1

1



19. Inventories


Food

Inventory at cost 3,922.9 3,610.0

Provisions (298.7) (278.4)

3,624.2 3,331.6

Liquor


Provisions (49.3) (44.5)

1,086.9 993.0

General Merchandise


Provisions (445.5) (425.4)

5,342.1 5,091.7

Home Improvement


Provisions (251.7) (249.7)

1,881.3 1,812.5

Total inventory net of provisions 11,934.5 11,228.8

Carrying amount of inventories carried at net realisable value 185.4 132.9

Inventory recognised as an expense in the year 67,453.0 66,962.6

Write-down recognised as an expense in the year 322.9 217.3

Inventory is fully funded by trade payables. Details of trade payables can be found in note 26.

No inventory is pledged as security.



20. Trade and other receivables


Trade receivables 2,372.4 2,222.3

Allowance for doubtful debts (122.7) (115.2)

2,249.7 2,107.1

Prepayments 102.1 74.8

Rebates and advertising from buying members 1,547.6 1,414.2

Other accounts receivable 728.5 648.6

FEC asset 69.5 43.6

Total receivables net of provisions 4,697.4 4,288.3

Trade receivables neither past due nor impaired 1,894.2 1,806.0

Movement in allowance for doubtful debts


Amounts previously in the provision written off during the year (27.3) (7.0)

Additional amounts raised 34.8 26.1

Balance at the end of the year 122.7 115.2

Ageing of impaired trade debtors provided for:

30 to 60 days 28.0 34.6

60 to 90 days 3.6 0.9

90 to 120 days 3.5 2.8

120+ days 87.6 76.9

Total 122.7 115.2

Trade receivables are well controlled throughout the Group, with trade receivable days remaining constant at 9. Allowance for doubtful debts at year end was 5.2% of trade receivables

(December 2014: 5.2%).

No interest is charged on the trade receivables. Trade receivables between 30 days and 180 days are provided for based on estimated irrecoverable amounts, determined by reference to

past default experience. It is the Group’s policy to provide fully for all receivables that are past due and not insured as well as those receivables over which the Group does not hold any

security, which as a result of historical experience are not considered to be recoverable.

Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and

scoring attributed to customers are reviewed quarterly to once a year. No customer represents more than 5% of the total balance of trade receivables.

Included in the Group’s trade receivables balance are receivables with a carrying amount of R355.5 million (December 2014: R301.1 million) which are past due at the reporting date for

which the Group has not provided. The average age of these receivables is 64 days (December 2014: 71 days).

Included in ‘Other accounts receivable’ is Value Added Taxation and other miscellanous receivables.

Rm Insured and recoverable Insured and recoverable

Ageing of past due but not impaired trade debtors

30 to 60 days 152.5 149.8

60 to 90 days 154.9 87.9

90 to 120 days 6.9 9.5

120+ days 41.2 53.9

Total 355.5 301.1

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the

reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, management believe that there is no further credit provision

required in excess of the allowance for doubtful debts. Refer to note 40 for the Group’s management of credit risk exposure.

There were no specific trade receivables under liquidation in the current and prior financial year.



21. Non-current assets classified as held for sale

At the end of the current year, non-current assets classified as held for sale represents one property in Masscash in the process of being sold following a store closure. At year end the

Group had entered into a sales agreement with the respective purchaser, however transfer of the property had not yet been effected. In the prior year, non-current assets classified as held

for sale represent two properties, both of which were sold during the current financial year.


Included in the Statement of Financial Position:

Non-current assets 11.5 18.0

- Property, plant and equipment 11.5 18.0

Total assets 11.5 18.0

Fair value of the properties are based on the respective sales agreements. For more information on the fair value of these non-current assets held for sale, refer to note 39.

Upon re-classification of the properties to non-current assets held for sale, impairment losses have been recognised. Refer to note 6 for more information.



22. Issued capital

Share capital Share premium

Rm December 2015 December 2014 December 2015 December 2014

Authorised

500,000,000 (December 2014: 500,000,000) ordinary shares of 1 cent each 5.0 5.0 - -

20,000,000 (December 2014: 20,000,000) non-redeemable cumulative non-participating

preference shares of 1 cent each 0.2 0.2 - -

18,000,000 (December 2014: 18,000,000) ‘A’ convertible redeemable non-cumulative

participating preference shares of 1 cent each 0.2 0.2 - -

4,000,000 (December 2014: 4,000,000) ‘B’ convertible redeemable non-cumulative

participating preference shares of 1 cent each - - - -

Issued

217,136,334 (December 2014: 217,118,072) ordinary shares of 1 cent each 2.2 2.2 675.1 733.4

2,840,483 (December 2014: 2,858,745) ‘B’ convertible redeemable non-cumulative

participating preference shares of 1 cent each - - - -

Number of Share capital Share premium

Ordinary shares shares Rm Rm

Balance at December 2013 217,109,044 2.2 743.3

Shares issued in terms of the Massmart Black Scarce Skills Trust 9,028 - -

Ordinary shares issued – December 2014 217,118,072 2.2 743.3

Treasury shares (194,765) - (9.9)

Ordinary shares issued excluding treasury shares – December 2014 216,923,307 2.2 733.4

Balance at December 2014 217,118,072 2.2 733.4

Shares issued in terms of the Massmart Black Scarce Skills Trust 18,262 - -

Ordinary shares issued – December 2015 217,136,334 2.2 733.4

Treasury shares (575,563) - (58.3)

Ordinary shares issued excluding treasury shares – December 2015 216,560,771 2.2 675.1

Ordinary shares, which have a par value of 1 cent, carry one vote per share and carry the right to dividends.

‘A’ convertible redeemable non-cumulative participating preference shares

There are no ‘A’ convertible redeemable non-cumulative participating preference shares in issue as the residual shares were automatically redeemed on the vesting of the Massmart

Thuthukani Empowerment Trust scheme, in terms of the Trust Deed in the 2013 financial year.

‘B’ convertible redeemable non-cumulative participating preference shares Number of Share capital Share premium

shares Rm Rm

Balance at December 2013 - - -

Net shares issued in terms of the Massmart BEE transaction 2,867,773 - -

Shares converted to ordinary shares (9,028) - -

Treasury shares (2,858,745) - -


Net shares issued in terms of the Massmart BEE transaction 2,858,745 - -

Shares converted to ordinary shares (18,262) - -

Treasury shares (2,840,483) - -


B’ convertible redeemable non-cumulative participating preference shares, which have a par value of 1 cent, are held in the Massmart Black Scarce Skills Trust. These shares carry one vote

per share, which are cast by the trustees, and do not carry the right to dividends. On election of the beneficiary, the shares will convert to ordinary shares on a one-for-one basis and will

rank pari passu with all ordinary shares then in issue.

Share options granted under the Massmart Holdings Limited Employee Share Trust

At December 2015, executives and senior employees have options of 7,673,705 (December 2014: 8,773,054) ordinary shares of which 2,289,364 (December 2014: 4,303,031) are unvested.

Share options granted under the Employee Share Incentive Schemes carry no rights to dividends and no voting rights. Additional information of the Employee Share Incentive Schemes

can be found in note 29.

During the current financial year, 0.9 million shares (0.4% of average shares in issue) were bought in the market by the Massmart Holdings Limited Executive Share Trust at an average

price of R148.88 totalling R135.5 million.

During the prior financial year, 0.6 million shares (0.3% of average shares in issue) were bought in the market were by the Massmart Holdings Limited Executive Share Trust at an average

price of R128.22 totalling R73.7 million.

The Directors have the authority, until the next annual general meeting, to issue the ordinary shares of the Company up to a maximum of 5% of the shares already issued.



23. Other reserves


Foreign currency translation reserve 29.3 50.8

Hedging reserve 11.0 7.8

Share-based payment reserve 1,051.8 833.3

Capital redemption reserve fund 0.2 0.2

Fair value adjustment of available-for-sale financial asset (13.1) (10.2)

Change in non-controlling interest (346.9) (328.2)

Treasury shares 1.2 -

Post-retirement medical aid actuarial gain 1.8 (3.2)

735.3 550.5

Reconciliation of the foreign currency translation reserve: December 2015 December 2014


Translation on consolidation (21.5) (53.7)

29.3 50.8

Exchange differences relating to the translation from functional currencies of the Group’s foreign subsidiaries into Rands are accounted for in the foreign currency translation reserve.

December 2015 December 2014Reconciliation of the hedging reserve:Balance at the beginning of the year 7.8 6.8

Foreign exchange loss in cost of sales (20.5) (11.7)

FEC asset 25.9 17.1

FEC liability (1.0) (4.0)


11.0 7.8

December 2015 December 2014Reconciliation of the share-based payment reserve:Balance at the beginning of the year 833.3 708.2

Share-based payment expense relating to the Massmart Holdings Limited Employee Share Trust 194.7 106.7

Deferred tax recognised in equity relating to the Massmart Holdings Limited Employee Share Trust - (2.8)

Share-based payment expense relating to the Massmart Black Scarce Skills Trust 23.8 21.2

1,051.8 833.3

Massmart introduced a new Employee Share Incentive Scheme called the Share Incentive Plan in the 2013 financial year. The share-based payment reserve arises on the granting of share

options and share awards to employees under the Employee Share Incentive Schemes. For additional information, refer to note 29.

1

2

3

1

2

3



24. Non-current liabilities

December 2015

December 2014Rm

Interest-bearing borrowings

Secured

Medium-term loan 600.0 600.0

Medium-term bank loans 1,938.3 2,087.2

Less: Payable within one year included in other current liabilities (note 28) (728.3) (565.5)

1,810.0 2,121.7

Capitalised finance leases 18.4 23.4

Less: Payable within one year included in other current liabilities (note 28) (8.8) (11.2)

9.6 12.2

Total non-current interest-bearing liabilities 1,819.6 2,133.9

Interest-free borrowings

Unsecured

Loans from non-controlling interests 2.1 2.1

Operating lease liability – lease smoothing adjustment 1,128.2 1,014.6

Other 11.5 13.3

Less: Payable within one year included in trade and other payables (note 26) (106.3) (103.4)

Total non-current interest-bearing liabilities 1,035.5 926.6

Medium-term loan

The medium-term loan is a fixed term loan of R600.0 million owed to Walmart. The interest is repayable quarterly over five years and was effective from 18 April 2013 at a fixed interest rate

of 7.46%. The loan is repayable in one final instalment in April 2018. The loan is secured by intragroup cross-suretyships.

Medium-term bank loans

Included in medium-term bank loans above is a fixed term loan of R750.0 million which was secured during the second half of the June 2012 financial year repayable quarterly over five

years. The drawdown of the loan occurred on 25 May 2012 at a fixed interest rate of 7.88%. The long-term portion of the loan at the end of the current financial year is R75.0 million

(December 2014: R225.0 million) and the short-term portion is R150.0 million (December 2014: R150.0 million). The loan is secured by intragroup cross-suretyships. The short-term portion

has been accounted for in note 28.

Included in medium-term bank loans above is a fixed term loan of R275.0 million which was secured during the second half of the December 2013 financial year repayable quarterly over

three years. The drawdown of the loan occurred on 28 November 2013 at a fixed interest rate of 7.23%. The long-term portion of the loan at the end of the current financial year is NIL

(December 2014: R91.6 million) and the short-term portion is R91.6 million (December 2014: R91.6 million). The loan is secured by intragroup cross-suretyships. The short-term portion has

been accounted for in note 28.

Included in medium-term bank loans above is a fixed term loan of R500.0 million which was secured during the first half of the December 2014 financial year repayable quarterly over five

years. The drawdown of the loan occurred on 2 June 2014 at a fixed interest rate of 8.40%. The long-term portion of the loan at the end of the current financial year is R250.0 million

(December 2014: R350.0 million ) and the short-term portion is R100.0 million (December 2014: R100.0 million). The loan is secured by intragroup cross-suretyships. The short-term portion



five years. The drawdown of the loan occurred on 28 November 2014 at a fixed interest rate of 8.17%. The long-term portion of the loan at the end of the current financial year is R360.0

million (December 2014: R480.0 million ) and the short-term portion is R120.0 million (December 2014: R120.0 million). The loan is secured by intragroup cross-suretyships. The short-term

portion has been accounted for in note 28.


five years. The drawdown of the loan occurred on 7 July 2014 at a fixed interest rate of 8.61%. The long-term portion of the loan at the end of the current financial year is R275.0 million

(December 2014 :R375.0 million) and the short-term portion is R100.0 million (December 2014: R100.0 million). The loan is secured by intragroup cross-suretyships. The short-term portion


Included in medium-term bank loans above is a fixed term loan of R500.0 million which was secured during the first half of the December 2015 financial year repayable quarterly over four

years. The drawdown of the loan occurred on 25 March 2015 at a fixed interest rate of 8.02%. The long-term portion of the loan at the end of the current financial year is R250.0 million and

the short-term portion is R166.7 million. The loan is secured by intragroup cross-suretyships. The short-term portion has been accounted for in note 28.

Capitalised finance leases

Capitalised finance leases include leases over motor vehicles; fixtures, fittings and computer hardware, repayable in monthly instalments varying from one to five years at various interest

rates of between 7.0% and 12.0% (December 2014: between 7.0% and 12.0%). The short-term portion has been accounted for in note 28.

The capitalised finance leases are secured by moveable assets with a book value of R17.8 million (December 2014: R22.2 million). No renewal terms nor contingencies exist, escalation

ranges between 7-8% on certain leases. These assets are accounted for in note 13.

Operating lease liability

The increase in the operating lease liability primarily relates to the increased number of stores opened during the current financial year.

For more information on the Group’s liquidity risk and interest rate risk management, refer to note 40.

Additional information on the fair value of ‘non-current liabilities’ can be found in note 39.



25. Provisions


Onerous lease provision 33.8 22.6

Less: Payable within one year included in current provisions (note 27) (10.4) (6.6)

Provision for post-retirement medical aid contributions 104.2 101.7

Less: Payable within one year included in current provisions (note 27) (2.8) (2.7)

124.8 115.0

Reconciliation of provisions

Rm Opening balance

Additional

amounts

provided

Amounts utilised Unused amounts

reversed Closing balance

December 2015

Onerous lease provision 16.0 11.9 - (4.5) 23.4

Provision for post-retirement medical aid contributions 99.0 2.4 - - 101.4

115.0 14.3 - (4.5) 124.8

December 2014

Onerous lease provision 18.0 3.8 (1.0) (4.8) 16.0

Provision for post-retirement medical aid contributions 84.2 14.8 - - 99.0

102.2 18.6 (1.0) (4.8) 115.0

Rm Repayable

within 1 year

Repayable in 2 –

5 years

Repayable after

5 years Total

December 2015 13.2 20.4 104.4 138.0

December 2014 9.3 13.7 101.3 124.3

The onerous lease provision relates to the closure of stores in the Masscash Division. The respective escalation rates range between 6.0% and 8.0%. The final onerous operating lease

expires in March 2025.

Includes financing costs.

Included in current provisions in note 27.

1

2

1

2

Post-retirement medical aid

Employees of Massmart participate on Massmart Health Plan and Resolution Health Medical Scheme administered by Universal Healthcare Proprietary Limited and Agility Global Health

Solutions Health Proprietary Limited respectively. The post-retirement subsidy policy is summarised below:

Members who joined Makro and Dion Stores prior to 1 July 1999 are eligible for a subsidy of medical scheme contributions upon retirement. Members who joined Massmart prior to 1

January 2000 are also eligible for a subsidy upon retirement;

Members and their spouses are entitled to a 50% subsidy of medical scheme contributions upon retirement; and

Dependants of eligible continuation members receive a subsidy before and after the death of the principal member.

If a member eligible for a subsidy of medical scheme contributions upon retirement dies in service, their dependants are eligible for a subsidy of medical scheme contributions as

described above for a period of three months.

The significant risks faced by Massmart as a result of the post-retirement healthcare obligation can be summarised as follows:

The risk that future CPI inflation and healthcare cost inflation are higher than expected and uncontrolled; and

The risk that pensioners live longer than expected and thus their healthcare benefit is payable for longer than expected.

The liability is unfunded. The significant assumptions are listed below.

Of particular importance is the ‘interest rate – medical inflation rate’ gap of 0.3% (December 2014: 0.2%) used in calculating the provision.


Significant assumptions:

Discount rate 9.8% p.a. 8.9% p.a.

Healthcare cost inflation 9.5% p.a. 8.7% p.a.

Consumer Price Index inflation 7.5% p.a. 6.7% p.a.

Expected retirement age 65 years 65 years

Membership discontinued at retirement or death-in-service 0% 0%

Movements in the post-retirement medical aid liability (Rm):

Opening defined benefit obligation 101.7 84.2

Current service cost 3.2 2.5

Interest cost 8.9 8.4

Employer benefits paid (2.7) (2.3)

Net actuarial (gain)/loss recognised in the year (6.9) 8.9

Closing defined-benefit obligation 104.2 101.7

CPI inflation by itself is not a significant assumption used in the valuation. This assumption has been based on the relationship between current conventional bond yields and current

index-linked bond yields. The healthcare cost inflation exceeds CPI inflation by an average of 2.0% per annum over the long term, which is seen to be appropriate.

The last valuation of the liability for the post-retirement medical aid contributions was performed as at December 2015 by Alexander Forbes, Fellow of the Institute of Actuaries (December

2014: Alexander Forbes, Fellow of the Institute of Actuaries). The current financial year costs have been assessed in accordance with the advice of independent actuaries.

The net actuarial gain in the current year arose as a result of a combination of the following factors:

Unexpected changes in the membership and membership profile resulted in a net gain of R2.9 million (December 2014: R0.1 million);

Lower than expected healthcare cost inflation resulted in a gain of R2.2 million (December 2014: R1.1 million); and

An unexpected gain of R1.8 million arose as a result of an increase in the real discount rate, i.e. an increase in the difference between the discount rate and the healthcare cost inflation

assumption from 0.2% per annum to 0.3% per annum.

Projection of defined-benefit obligation

Provided that all actuarial assumptions are borne out in practice, the accrued liability is expected to increase each year in line with:

The rate of discount;

Plus the cost of an additional year’s accrual for in-service members (service cost); and

Less the benefit payments made by the employer in respect of continuation members.

A projection of results:

Rm December 2015

Defined-benefit obligation at December 2015 104.2

Current service cost 2.7

Interest cost 10.0

Expected employer benefits paid (2.9)

Defined-benefit obligation at December 2016 114.0

1

1

Maturity profile of defined-benefit obligation

The expected contributions to the defined benefit plan obligation in the following financial year is R2.9 million.

The average duration of the defined benefit plan obligation at the end of the reporting period is 19.8 years (December 2014: 20.5 years).

Sensitivity analysis

The valuation results are based on a number of assumptions. The value of the defined benefit obligation could be overstated or understated, depending on the extent to which actual

experience differs from the assumptions adopted.

2015

Central

assumption

Decrease

Increase

Sensitivity analysis on the defined benefit obligation:

1% decrease or increase in the rate of healthcare cost inflation 9.5% -1.0% 1.0%

Defined-benefit obligation in (Rm) 103.8 87.6 124.3

% change -15.6% 19.8%

0.5% decrease or increase in the rate of healthcare cost inflation for

the next 5 years, thereafter returning to a healthcare cost inflation of

9.5%

9.5% -0.5% 0.5%


% change -2.1% 2.1%

5% or 10% increase in the rate of healthcare cost inflation for the

next 5 years, thereafter returning to a healthcare cost inflation of

9.5%

9.5% 5.0% – 10.0%

Defined-benefit obligation in (Rm) 103.8 127.9 – 156.5

% change 23.3%- 50.9%

1% decrease or increase in the discount rate 9.8% -1.0% 1.0%


% change 19.9% -15.4%

1 year decrease or increase in the expected retirement age 65 years - 1 year 1 year


% change 4.9% -4.5%

Sensitivity analysis on the aggregate of the current service and

interest cost:

1% decrease or increase in the rate of healthcare cost inflation fromprevious valuation

8.7% -1.0% 1.0%

Current service cost and interest cost from the previous valuation (Rm) 11.7 9.7 14.4

% change -17.5% 22.6%

2014

Central

assumption

Decrease

Increase

Sensitivity analysis on the defined benefit obligation:

1% increase or decrease in the rate of healthcare cost inflation 8.7% -1.0% 1.0%


% change -16.1% 20.7%

0.5% increase or decrease in the rate of healthcare cost inflation for

the next 5 years, thereafter returning to a healthcare cost inflation of

9.3%

8.7% -0.5% 0.5%


% change -2.1% 2.1%

5% or 10% increase in the rate of healthcare cost inflation for the

next 5 years, thereafter returning to a healthcare cost inflation of

9.3%

8.7% 5.0% – 10.0%

Defined-benefit obligation in (Rm) 101.7 125.6 – 154.0

% change 23.5% – 51.5%

1% increase or decrease in the discount rate 8.9% - 1% 1.0%


% change 20.8% -16.0%

1 year increase or decrease in the expected retirement age 65 years - 1 year + 1 year


% change 4.1% -4.6%

Sensitivity analysis on the aggregate of the current service and

interest cost:

1% increase or decrease in the rate of healthcare cost inflation from

previous valuation 9.3% -1.0% 1.0%

Current service cost and interest cost from the previous valuation (Rm) 10.9 9.0 13.4

% change -17.3% 22.3%



26. Trade and other payables


Trade payables 16,320.4 14,841.5

Operating lease liability – lease smoothing adjustment 106.3 103.4

Payroll accruals 791.2 735.6

FEC liability 7.7 6.7

Income received in advance 53.6 70.4

Rebates and advertising owing to buying members 141.1 129.0

Interest accrual 38.3 32.1

Amounts due to Walmart 299.4 218.3

Sundry payables and other accruals 2,169.7 2,186.5

19,927.7 18,323.5

For more information on amounts due to Walmart refer to note 5 and note 34.

Trade payables do not attract interest.

For more information on the operating lease liability refer to note 24.

The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe, normally around 60 days.

Control over trade payables has resulted in the average term increasing to 76 days (December 2014: 75 days). Settlement discounts received range from

0.3% to 5.0% (December 2014: 1.0% to 2.2%).

‘Sundry payables and other accruals’ comprises other sundry creditor accruals and VAT payable.



27. Provisions and other


Onerous lease provision 10.4 6.6

Provisions raised on asset acquisitions 12.6 12.6

Provision for Supplier Development Fund 111.6 157.2

Provision for post-retirement medical aid contributions 2.8 2.7

Other 12.6 16.3

150.0 195.4

Provisions raised against specific assets, for example inventories and trade receivables, are accounted for with those assets and are detailed in the relevant notes.

The Group established the Supplier Development Fund in line with the judgement of the Competition Appeal Court at the time of the Walmart transaction. The purpose of the fund is to

assist the Group’s suppliers, particularly Black Economic Empowerment suppliers, in order to promote and benefit from the growth of their businesses. The fund has no fixed utilisation

requirements per year.

Reconciliation of provisions

Rm

Opening

balance

Amounts

provided

Amounts

utilised

Unused

amounts

reversed

Closing balance

December 2015


Provisions raised on asset acquisitions 12.6 - - - 12.6

Provision for Supplier Development Fund 157.2 - (45.6) - 111.6

Provision for post-retirement medical aid contributions 2.7 2.8 (2.7) - 2.8

Other 16.3 8.6 (8.9) (3.4) 12.6

195.4 18.9 (58.5) (5.8) 150.0

December 2014


Contingent consideration payable on business acquisitions 92.9 - (90.0) (2.9) -

Provisions raised on asset acquisitions 8.5 11.6 - (7.5) 12.6

Provision for Supplier Development Fund 202.5 - (45.3) - 157.2

Provision for post-retirement medical aid contributions - 5.0 (2.3) - 2.7

Other 14.5 7.8 (2.9) (3.1) 16.3

327.0 30.1 (143.6) (18.1) 195.4



28. Other current liabilities


Medium-term bank loans 728.3 565.5

Capitalised finance leases 8.8 11.2

Massmart Education Foundation loan 5.1 4.8

Medium-term loans 463.9 249.7

- Foreign bank loans 459.5 237.8

- Short-term foreign bank loan - 7.6

- Lamberti Education Foundation Trust loan 4.4 4.3

1,206.1 831.2

Medium-term bank loans and capitalised finance leases

For more information on the medium-term bank loans, medium term loans and capitalised finance leases, refer to note 24.

The Massmart Education Foundation loan represents cash reserves invested with Group Treasury. Interest was incurred at a variable rate based on the daily

prime rate plus 25 basis points at year end, and has no fixed terms of repayment.

Medium-term loans

In the current year and prior year ‘foreign bank loans’ comprise an offshore USD facility, granted by Standard Chartered Bank, available for working capital

and general corporate requirements. The Group is using this loan to fund its African expansion. During the current year, the final drawdown of USD 9.5

million was utilised in order to settle the Group’s utilised portion of the HSBC overdraft. The facility is capped at USD 30.0 million, of which the Group has

utilised all USD 30 million (December 2014: USD 20.5 million) at the year end. Interest is incurred daily at the average 6 monthly USD LIBOR rate plus 155

basis points, in arrears.

In the prior year, the ‘short-term foreign bank loan’ was an offshore USD overdraft facility, granted by HSBC, to fund the Group’s working capital

expenditure requirements in Africa. The Group repaid its outstanding balance under this facility during the current year (December 2014: USD 0.7 million).

The facility is capped at USD 15.0 million and is available for utilisation should the Group wish to draw from it. Interest is incurred based on the overnight

USD LIBOR plus 0.75% per annum. The facility imposes financial covenants on the Group, none of which have been breached during the current financial

year. All amounts drawn down in terms of this facility are repayable on demand.

The Lamberti Education Foundation Trust loan represents cash reserves invested with Group Treasury. Interest was earned at a variable rate based on the

daily prime rate plus 25 basis points which amounted to 5.7% (December 2014: 5.4%) at year end, and has no fixed terms of repayment.


For more information on the Group’s liquidity risk and interest rate risk management, refer to note 40.



29. Employee Share Incentive Schemes

Massmart Holdings Limited Employee Share Trust

Massmart introduced a new Share Incentive Scheme in the 2013 financial year referred to as the Employee Share Incentive Plan. Massmart Holdings Limited’s shareholders approved the

scheme at the Annual General Meeting held on 22 May 2013. The new scheme entails participation through a retention share grant and a performance share award, further explained

below. The first grant of retention grants and performance awards under the new scheme was made on 16 September 2013. The purpose of the new scheme is to replace the existing

Employee Share Option Scheme which had its last grant date on 1 May 2013. The Employee Share Option Scheme will continue to give rise to an equity-settled share-based payment

expense until the end of the December 2018 financial year. The final options of this scheme will expire in the 2023 financial year. Both Employee Share Incentive Schemes are

administered through the Massmart Holdings Limited Employee Share Trust.

Shares to satisfy awards and options

It is Massmart’s practice to satisfy grants, awards and options granted under the Employee Share Incentive Schemes through shares purchased in the market and held by the Massmart

Holdings Limited Employee Share Trust, which was established for the purpose of satisfying grants, awards and options under the Employee Share Incentive Schemes, and is funded by

the Company.

Employee Share Option Scheme

Massmart granted share options entitling certain employees within the Group to its shares under the Employee Share Option Scheme. The options were granted by Massmart in its own

shares resulting in them being accounted for as equity-settled share-based payments. Employees are required to be employed up to the date of vesting in order to receive the share

options earned by them. The share-based payment valuation was performed by Alexander Forbes for all periods with respect to the share options.

Vesting occurs over a five-year period as follows:

- 25% two years after the offer date;

- 50% three years after the offer date;

- 75% four years after the offer date;

- 100% five years after the offer date; and

- expires ten years after the offer date.

The following options granted to employees and Executive Directors in terms of the Employee Share Option Scheme have not yet been exercised:

2015

Offer date Expiry date

Exercise price

(R)

No of options at

December 2014

No of options

forfeited and

expired

No of options

exercised

No of options

closing balance

27 May 2005 26 May 2015 42.97 12,664 - 12,664 -

30 November 2005 29 November 2015 51.19 3,618 - 3,618 -

1 April 2006 31 March 2016 58.74 2,773 - 2,773 -

23 May 2006 22 May 2016 54.13 19,607 - 1,728 17,879

25 August 2006 24 August 2016 51.93 4,724 - - 4,724

15 November 2006 14 November 2016 62.04 14,700 - - 14,700

23 February 2007 22 February 2016 67.79 28,033 - 5,218 22,815

2 April 2007 1 April 2017 82.67 5,573 - - 5,573

24 May 2007 23 May 2017 94.25 192,395 - 32,774 159,621

24 August 2007 23 August 2017 80.75 41,216 - - 41,216


1 April 2008 31 March 2018 66.91 191,167 - 24,225 166,942

26 May 2008 25 May 2018 72.86 506,234 - 57,469 448,765

1 September 2008 31 August 2018 79.86 88,464 - - 88,464

27 October 2008 26 October 2018 72.42 106,017 - 84,488 21,529


1 March 2009 28 February 2019 70.71 97,196 - 24,170 73,026

27 May 2009 26 May 2019 77.55 508,286 - 65,658 442,628

1 September 2009 31 August 2019 79.15 33,208 - - 33,208

1 October 2009 30 September 2019 87.60 9,605 - - 9,605


1 March 2010 28 February 2020 90.49 89,129 - 39,158 49,971

1 April 2010 31 March 2020 108.95 14,722 - 7,857 6,865

1 May 2010 30 April 2020 110.00 30,142 2,607 2,948 24,587

1 September 2010 31 August 2020 120.42 190,145 2,813 9,715 177,617

1 September 2011 31 August 2021 153.84 3,108,887 282,099 146,156 2,680,632

1 November 2011 31 October 2021 157.27 380,491 30,522 - 349,969

1 March 2012 28 February 2022 174.88 421,478 48,078 - 373,400

1 April 2012 31 March 2022 164.09 122,954 - - 122,954

16 May 2012 15 May 2022 159.62 333,314 - - 333,314

1 September 2012 31 August 2022 168.03 1,105,909 151,175 - 954,734

15 October 2012 14 October 2022 167.06 321,729 - - 321,729

1 March 2013 28 February 2023 186.05 699,092 61,436 - 637,656

1 May 2013 30 April 2023 187.53 33,907 - - 33,907

8,773,054 578,730 520,619 7,673,705

2014

Offer date

Expiry date Exercise price

(R) No of options at

December 2013

No of options

forfeited and

expired No of options

exercised No of options

closing balance

1 April 2005 31 March 2015 41.91 47,000 - 47,000 -

27 May 2005 26 May 2015 42.97 13,303 - 639 12,664

1 November 2005 31 October 2015 51.91 996 - 996 -


1 April 2006 31 March 2016 58.74 7,665 - 4,892 2,773

23 May 2006 22 May 2016 54.13 22,863 - 3,256 19,607

25 August 2006 24 August 2016 51.93 4,724 - - 4,724


23 February 2007 22 February 2016 67.79 32,152 - 4,119 28,033

2 April 2007 1 April 2017 82.67 5,573 - - 5,573

24 May 2007 23 May 2017 94.25 239,073 - 46,678 192,395

24 August 2007 23 August 2017 80.75 41,216 - - 41,216


1 April 2008 31 March 2018 66.91 228,602 - 37,435 191,167

26 May 2008 25 May 2018 72.86 590,590 - 84,356 506,234

1 September 2008 31 August 2018 79.86 120,164 - 31,700 88,464

27 October 2008 26 October 2018 72.42 129,126 - 23,109 106,017


1 March 2009 28 February 2019 70.71 107,694 - 10,498 97,196

27 May 2009 26 May 2019 77.55 624,089 4,419 111,384 508,286


1 October 2009 30 September 2019 87.60 17,923 - 8,318 9,605

16 November 2009 15 November 2019 88.71 18,820 - 8,548 10,272

1 March 2010 28 February 2020 90.49 113,775 4,017 20,629 89,129

1 April 2010 31 March 2020 108.95 19,092 - 4,370 14,722

1 May 2010 30 April 2020 110.00 32,748 - 2,606 30,142


1 September 2011 31 August 2021 153.84 3,318,101 209,214 - 3,108,887

1 November 2011 31 October 2021 157.27 432,365 51,874 - 380,491

1 March 2012 28 February 2022 174.88 421,478 - - 421,478

1 April 2012 31 March 2022 164.09 122,954 - - 122,954

16 May 2012 15 May 2022 159.62 377,779 44,465 - 333,314

1 September 2012 31 August 2022 168.03 1,235,157 129,248 - 1,105,909

15 October 2012 14 October 2022 167.06 321,729 - - 321,729

1 March 2013 28 February 2023 186.05 739,384 40,292 - 699,092

1 May 2013 30 April 2023 187.53 33,907 - - 33,907

9,723,039 483,529 466,456 8,773,054


Reconciliation of the number of shares options issued 000s 000s

Total shares and options available to the scheme 39,500 39,500

Shares and treasury shares issued to the scheme (16,493) (16,493)

Remaining capacity for issue in terms of the JSE practice 23,007 23,007

Opening balance of shares and options issued 9,392 10,554

Shares and options sold by employees and Executive Directors (863) (678)

Shares repurchased from/ forfeited by employees and options lapsed/ forfeited (579) (484)

Closing balance of shares and options issued 7,950 9,392

The closing balance includes 277,145 (December 2014: 619,443) shares and 7,673,705 (December 2014: 8,773,054) options. Shares and options previously issued to employees who then

subsequently left the Group are excluded from the figures above.

Once the options have vested they may be exercised at any time, up to ten years, from the offer date. Once exercised, the relevant shares can be sold at the discretion of the participants.

In terms of the scheme rules, share trust loans have been raised on offers made to Executive Directors and other employees. Refer to note 17 on Employee Share Trust loans to Executive

Directors and other employees.

Movement in the year

The following options granted to employees and Executive Directors in terms of the Employee Share Option Scheme have not yet been exercised:


Number of share

options

Weighted

average exercise

price

Number of share

options

Weighted

average exercise

price

Rand Rand

Outstanding at the beginning of the year 8,773,054 141.6 9,723,039 139.4

Exercised during the year (520,619) 99.0 (466,456) 75.5

Forfeited or expired during the year (578,730) 162.5 (483,529) 160.0

Outstanding at the end of the year 7,673,705 143.0 8,773,054 141.6

Exercisable at the end of the year 5,384,341 4,470,023

In December 2015, the weighted average share price at the date of exercise for share options exercised during the year was R153.95. The options outstanding at the end of the year had a

weighted average remaining contractual life of 5.4 years. No options were granted in the current financial year.


weighted average remaining contractual life of 6.3 years. No options were granted in the current financial year.

Fair value of share options granted during the year

There were no grants issued during the current financial year.

Employee Share Incentive Plan

Massmart granted retention share grants and performance share awards entitling certain employees within the Group to fully-paid shares under the Employee Share Incentive Plan. The

grants and awards were granted by Massmart in its own shares resulting in the grants and awards being treated as equity-settled share-based payments. The Employee Share Incentive

Plan is split into two incentive structures, mainly, retention share grants and performance share awards. Retention share grants require the employee to remain employed at the date of

vesting in order to receive the shares earned by them. In determining the spot price at grant date its fair market value is the volume weighted average price of a share on the

Johannesburg Stock Exchange (JSE) over the ten trading days immediately prior to the day in question. Performance share awards are subject to non-market conditions in years one, two

and three based 50% on Group Return of Investment (ROI) and 50% on Group nominal sales against the budgeted equivalent for that year. The share-based payment valuation was

performed using a valuation system acquired by the Group with the necessary model inputs having been determined by management. Management derived these inputs through

consultation with various financial institutions, and they are representative of the market data available for Massmart Holdings Limited’s share at the reporting date. Vesting occurs over a

five-year period for retention share grants and over a three-year period for performance share awards as follows:

Retention share

grants

Performance

share awards

- Three years after the offer date 33% 100%

- Four years after the offer date 33% N/A

- Five years after the offer date 33% N/A

The following grants and awards granted to employees and Executive Directors in terms of the Employee Share Incentive Plan have not yet been exercised:


Retention share awards

Number of share

grants and

awards

Vesting Period

Number of share

grants and

awards

Vesting Period

16 September 2013 323,236 2016 to 2018 344,624 2016 to 2018

15 September 2014 733,914 2017 to 2019 779,689 2017 to 2019

16 March 2015 61,178 2018 to 2020 - -

15 September 2015 820,437 2018 to 2020 - -

Performance share awards

16 September 2013 708,988 2016 761,903 2016

17 March 2014 1,055,509 2017 1,110,418 2017

16 March 2015 1,025,501 2018 - -

Total awards 4,728,763 2,996,634

Exercisable at the end of the year - -

Movement in the Year


Number of share

grants and

awards

Weighted

average exercise

price Number of share

grants and

awards

Weighted

average exercise

price

Rand Rand

Outstanding at the beginning of the year 2,996,634 - 1,221,814 -

Granted during the year 1,959,803 - 1,890,107 -

Forfeited or expired during the year (227,674) - (115,287) -

Outstanding at the end of the year 4,728,763 - 2,996,634 -

Exercisable at the end of the year - -

The estimated fair values of the retention share grants at grant date was R110.43 (December 2014: R121.66) and the performance share awards was R134.15 (December 2014: R132.71).

Fair value of retention share grants and performance share awards granted during the year

These fair values were calculated using the Lattice Model. The inputs into the model at grant date were as follows:

Retention share grants (15 September 2015) December 2015 December 2014

10 day volume weighted average share price (Rand) 107.9 126.3

Expected volatility 29.17% – 29.38% 27.74% – 28.43%

Expected life 2.25 – 4.75 years 2.75 – 4.75 years

Risk-free rate 7.18% -7.58% 7.19% – 7.62%

Expected dividend yield 3.37% 3.55%

Performance share awards and retention share grants (16 March 2015)

10 day volume weighted average share price (Rand) 149.1 129.4

Expected volatility 30.05% 22.70%

Expected life 2.25 years 2.25 years

Risk-free rate 7.06% 7.46%

Expected dividend yield 2.82% 3.08%

Exercise price - -

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the number of previous years corresponding with the share awards vesting

period. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural

considerations. The risk-free rate used was the swap rate over the vesting period of the share grants and awards.

Massmart Black Scarce Skills Trust

The Black Scarce Skills Trust is a share-scheme used to attract and retain African, Coloured and Indian employees. The Executive Committee of each of the Divisions and the Massmart

Remuneration Committee submit their nominations to the Black Scarce Skills Trust trustees for approval, upon which allocations are made bi-annually in April and October of each year. A

beneficiary can only receive one allocation.

Vesting occurs over a five-year period as follows:

- 25% two years after the offer date;

- 50% three years after the offer date;

- 75% four years after the offer date;

- 100% five years after the offer date; and

- expires five years after the offer date.

The following options granted to eligible employees in terms of the Massmart Black Scarce Skills Trust have not yet been exercised:

Offer date Expiry date Exercise price

(R)

No of options

opening balance

No of options

forfeited and

expired

No of options

exercised

New options

granted

No of options

closing balance

December 2015

1 April 2010 31 March 2015 108.95 59,764 14,464 45,300 - -

1 October 2011 30 September 2016 143.74 534,821 66,204 53,366 - 415,251

1 April 2012 31 March 2017 164.09 344,809 26,404 - - 318,405

1 October 2012 30 September 2017 166.91 218,814 29,686 - - 189,128

1 April 2013 30 March 2018 189.13 169,066 27,815 - - 141,251


1 April 2014 30 March 2019 136.69 296,456 14,781 - - 281,675


3,009,870 239,531 98,666 - 2,671,673

December 2014

1 April 2009 31 March 2014 71.96 10,873 918 9,955 - -

27 May 2009 26 May 2014 77.56 4,290 - 4,290 - -

1 April 2010 31 March 2015 108.95 76,582 2,043 14,775 - 59,764


1 April 2012 31 March 2017 164.09 369,388 24,579 - - 344,809


1 April 2013 30 March 2018 189.13 182,133 13,067 - - 169,066


1 April 2014 30 March 2019 136.69 - 9,201 - 305,657 296,456

1 October 2014 30 September 2019 120.29 - 10,690 - 507,407 496,717

2,348,079 122,253 29,020 813,064 3,009,870


000s 000s

Reconciliation of the number of options issued

Opening balance of share options 3,010 2,348

New share options offered to employees - 814

Share options sold by employees (99) (29)

Share options repurchased from/forfeited by employees and options lapsed/forfeited (240) (123)

Closing balance of share options 2,671 3,010

Number of options exercisable 793 428


weighted average remaining contractual life of 2.40 years.

In December 2014, the weighted average share price at the date of exercise for share options exercised during the year was R132.68 The options outstanding at the end of the year had a

weighted average remaining contractual life of 3.27 years. Options were granted on 1 April 2014 and 1 October 2014. The estimated fair values of the options granted on these dates were

R23.45 and R19.48.

Fair value of share options granted during the year

These fair values were calculated using the binomial model. The inputs into the model at grant date were as follows: December 2015 December 2014

Weighted average share price (Rand) - 127.8

Expected volatility - 22.57% – 23.13%

Expected life - 3 – 5 years

Risk-free rate - 7.1% – 7.8%

Expected dividend yield - 2.5% – 2.7%

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the number of previous years corresponding with the option lifetime. The

expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Expense charged to Profit or Loss

The expense recognised for employee services received during the year on equity-settled share-based payment transactions is shown in the following table:


Expense arising from Employee Share Option Scheme 44.7 52.5

Expense arising from Employee Share Incentive Plan 150.0 54.2

Expense arising from Black Scarce Skills Trust 23.8 21.2

Total expense arising from equity-settled share-based payment transactions 218.5 127.9



30. Retirement benefit information

All full-time permanent Massmart staff are members of either the Massmart Pension Fund, the Massmart Provident Fund or the SACCAWU National

Provident Fund. These funds are defined contribution funds and are subject to the Pension Funds Act, 1956. Following the recent acquisitions, some staff

are still members of the retirement funds of the previous business owners. Projects are underway to transfer these employees to one of the above funds in

future.

The Massmart Pension Fund and Massmart Provident Fund have been classified as valuation exempt. The Board of Trustees successfully submitted

applications for exemption from valuation in 2015 and the funds were, therefore, exempt from the provisions of sections 9A and 16 of the Pension Funds

Act, with effect from 28 February 2015. The exemption expires on 28 February 2018. This exemption may be extended upon submission of an application

in terms of the Notice, which must be submitted to the registrar on or before 28 February 2019; failing which the fund must undergo a statutory actuarial

valuation as at 28 February 2018, which must be submitted to the registrar by 28 February 2019. The fund will reapply if required.

Contributions received by the funds for the year ended December 2015 amounted to R518.8 million (December 2014: R487.0 million). The Group’s

contribution of R310.0 million (December 2014: R299.8 million) was included in the Income Statement for the year in ‘Employee costs’.



31. Commitments


Commitments in respect of capital expenditure approved by Directors:

Contracted for

Stores to be opened 116.1 277.2

Distribution centre to be opened 18.7 16.0

Stores to be refurbished 18.6 114.1

Purchase of plant and equipment 94.7 23.5

Purchase of new system software 217.2 162.3

Purchase of new computer hardware 24.9 41.5

Purchase of motor vehicles 1.8 3.4

Store relocations 4.5 17.8

Store conversions - 2.3

Minor revamps 20.3 34.9

Store Expansion and Reduction 436.6 166.0

Rebranding - 5.1

953.4 864.1

Not contracted for

Stores to be opened 383.7 388.3

Stores to be refurbished 133.5 358.4

Purchase of plant and equipment 130.8 114.3

Purchase of new system software 132.2 81.8

Purchase of new computer hardware 24.8 31.5

Purchase of motor vehicles 46.1 68.9

Minor revamps 44.5 42.3

Distribution centre to be opened - 0.9

Logistical expansion 30.0 40.2

Store relocations 108.3 28.5

1,033.9 1,155.1

1,987.3 2,019.2

Massmart has the right of first refusal on the sale of any shares by the non-controlling interest holders in various Masscash stores. Historically Massmart has

exercised this right.

Capital commitments will be funded using current facilities.



32. Operating lease commitments

Net operating lease expense


Land and buildings

Year 1 1,978.1 1,788.3

Years 2 to 5 7,124.1 6,684.7

Subsequent to year 5 6,441.3 6,979.0

15,543.5 15,452.0

Plant and equipment

Year 1 6.4 5.1

Years 2 to 5 17.6 7.5

24.0 12.6

Other

Year 1 5.0 10.3

Years 2 to 5 3.2 7.2

8.2 17.5

15,575.7 15,482.1

Leases on properties are contracted for periods of between 3 and 20 years with renewal options averaging a further 3 to 25 years. Rental comprises

minimum monthly payments and in some cases, contingent payments based on turnover levels. Turnover rentals, where applicable, average 1.5%

(December 2014: 1.5%) of turnover. Rental escalations vary, but are between 5 and 11.5% p.a (December 2014: 5 and 11.5% p.a).



33. Contingent liabilities


Contingent liabilities 7.2 4.2

In the ordinary course of business, the Group and its subsidiaries are involved in a number of legal proceedings. In the Board of Directors’ judgment, however, there are no current,

pending or threatened legal or arbitration proceedings that may have, or have had in the previous 12 months, a material effect on the Group’s financial position.

33.1 Lease exclusivity

We have previously disclosed various litigation and regulatory referrals related to restrictive lease clauses involving Massdiscounters/Game, three of the major food retailers in South Africa

and certain South African landlords. Most of these proceedings are on-going. During 2015 we received an adverse judgment in one of the interdict applications involving Pick ‘n Pay in the

Supreme Court of Appeal. We have appealed this ruling to the Constitutional Court and our leave to appeal has been granted. The Competition Commission market enquiry into the

potential anti-competitive effect of excluding new market entrants by means of lease usage and exclusivity clauses is underway. We have subsequently also proceeded to self-refer the

matter to the Competition Tribunal and have named Pick ‘n Pay, Shoprite and Spar as respondents. If the conclusion of these proceedings is not in our favour, in whole or in part, then a

key Group strategy in certain localities in South Africa could be delayed or curtailed. In addition to this matter, the Group and our subsidiaries are party to a variety of legal, administrative,

regulatory and government proceedings, claims and inquiries arising in the normal course of business. While the results of these proceedings, claims and inquiries cannot be predicted

with certainty, management believes that the final outcome of the foregoing will not have a material adverse effect on the Group’s financial position.



34. Related-party transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of

transactions between the Group and other related parties are disclosed below.



Compensation of key management personnel:

The remuneration of Executive Directors and other key management were as follows:

Short-term benefits (salaries, benefits and short-term incentives) 24.0 22.4

Retirement benefits 1.0 0.9

Other long-term benefits 0.8 2.2

Gains on exercise of share options - 15.8

25.8 41.3

Key management is defined as the two Executive Directors (December 2014: three Executive Directors).

Other related-party transactions:

Of the Walmart integration and related costs, an amount due to Walmart of R299.4 million (December 2014: R218.3 million) remains unpaid at the end of the current financial year and has

been included in ‘Amount due to Walmart’ in note 26. An amount due from Walmart of R6.7 million (December 2014: R12.0 million) remains receivable at the end of the current financial

year and has been included in ‘other accounts receivable’ in note 20. These are non- interest bearing and have no fixed terms of repayment.

Main Street 830 Proprietary Limited, a subsidiary of Wal-Mart Stores, Inc. and the direct holding company of Massmart Holdings Ltd receives dividends from the Company. Dividends of

R479.3 million (December 2014: R479.3 million) were paid during the year.

In April 2013 the Group secured a medium-term loan with Walmart repayable after five years. Interest of 7.46% is repaid quarterly. The loan of R600.0 million is accounted for under

non-current interest-bearing liabilities. Additional information can be found in note 24.

Loans to Executive Directors and Executive Committee members have been disclosed in note 17.

The Massmart Health Plan and Resolution Health Medical Scheme, Massmart Pension Fund and Massmart Provident Fund are managed for the benefit of past and current employees of

the Group. Additional information can be found in note 25 and note 30.

Refer to note 35 and 36 for more information regarding Directors remuneration and interests in the Company’s Share Incentive Schemes.



35. Directors’ emoluments

R000

Services as

Directors of

Massmart

Holdings

Limited

Salary and

allowances

Bonuses and

performance

related

payments

Other

benefits

Retirement

and related

benefits Subtotal

Fringe

benefit of

interest-free

loans used to

finance

shares

Gains on

exercise of

share

options and

on shares

purchased

by Directors Total

For the 52 weeks ended

December 2015

Executive Directors

Hayward, GRC - 5,175 5,273 965 543 11,956 834 - 12,790

Zwarenstein, I - 671 - - 63 734 - - 734

van Lierop, J - 4,106 5,582 2,222 356 12,266 - - 12,266

- 9,952 10,855 3,187 962 24,956 834 - 25,790

Non-executive Directors

Dlamini, KD 1,440 - - - - 1,440 - - 1,440

Seabrooke, CS 1,531 - - - - 1,531 - - 1,531

Broader, S - - - - - - - - -

Clarke, A - - - - - - - - -

Gwagwa, NN 543 - - - - 543 - - 543

Kgosana, R 185 - - - - 185 - - 185

Langeni, P 795 - - - - 795 - - 795

Suarez, JP - - - - - - - - -

4,494 - - - - 4,494 - - 4,494

Total 4,494 9,952 10,855 3,187 962 29,450 834 - 30,284

The Board is wholly responsible for the formulation, development and effective implementation of Group strategy. The Board has gained progressive insight into the definition of a

‘prescribed officer’ following the issuance of guidance from SAICA and, in turn, delegates operational strategy implementation and general executive management of the business to its

Executive Directors. As such, in terms of section 38 of the Companies Act 2008, those previously designated as prescribed officers are no longer deemed to be. For ease of reference, the

2014 cost relating to those previously designated as prescribed officers was R72.2 million.

1 2

3

4

5

6

7

R000

Services as

Directors of

Massmart

Holdings

Limited

Salary and

allowances

Bonuses and

performance

related

paymentsOther

benefits

Retirement

and related

benefits Subtotal

Fringe

benefit of

interest-free

loans used to

finance

shares

Gains on

exercise of

share

options and

on shares

purchased

by Directors Total

For the 52 weeks ended

December 2014

Executive Directors

Pattison, GM - 5,215 - 692 365 6,272 1,365 15,788 23,425

Hayward, GRC - 4,443 5,916 667 337 11,363 844 - 12,207

Zwarenstein, I - 2,603 2,827 103 162 5,695 - - 5,695

- 12,262 8,743 1,462 864 23,330 2,209 15,788 41,327

Non-executive Directors

Dlamini, KD 892 - - - - 892 - - 892

Seabrooke, CS 1,491 - - - - 1,491 - - 1,491

Broader, S - - - - - - - - -

Clarke, A - - - - - - - - -

Gwagwa, NN 512 - - - - 512 - - 512

Langeni, P 758 - - - - 758 - - 758

Suarez, JP - - - - - - - - -

Cheesewright, D - - - - - - - - -

Davis, JA - - - - - - - - -

Lamberti, MJ 359 - - - - 359 - - 359

4,012 - - - - 4,012 - - 4,012

Total 4,012 12,262 8,743 1,462 864 27,343 2,209 15,788 45,340

In order to match incentive awards with the performance to which they relate, bonuses above reflect the amounts accrued in respect of each year and not amounts paid in that year.

Held in terms of the rules of the Company’s share scheme.

Resigned with effect from 12 March 2015.

Appointed with effect from 12 March 2015.

Resigned with effect from 9 November 2015.

Appointed with effect from 16 July 2014.

Appointed with effect from 1 September 2015.Resigned with effect from 31 December 2014. As a past Director GM Pattison earned a gain on the exercise of share options and on shares purchased of R29.4 million as well as a fringebenefit of R0.2 million in the current year. Refer to note 36 for more detail.Resigned with effect from 16 July 2014.

Resigned with effect from 10 April 2014.

1 2

8

3

5

6

9

9

10

1

2

3

4

5

6

7

8

9

10



36. Interests of directors in the Company’s share scheme

Details of Directors’ shares and share options per Director:

Grant dates

Subscription

price (R)

Market price

(R)

Number of

shares/share

options

Gain on

sale/exercise (R

000’s) Expiry date

Pattison, GMEmployee Share Option Scheme (note 29)

Balance at December 2013 684,021

Options exercised/ shares sold - - - (230,750) -


Options forfeited Various 154 - (79,303) - _

Options exercised1 September

2011 154 162 (79,300) 618

Shares sold 23 May 2006 54 162 (183,750) 19,752

Shares sold 24 May 2007 94 162 (26,948) 1,816

Shares sold 26 May 2008 73 162 (41,768) 3,708

Shares sold 27 May 2009 78 162 (42,202) 3,547

Balance at December 2015 -

Employee Share Incentive Plan (note 29)


Share awards/ Share grants - - - - - -


Performance share awards forfeited16 September

2013- - (28,705) -

15 September2016

Restricted share grants forfeited16 September

2013- - (9,569) -

15 September2018


Grant dates

Subscription

price (R)

Market price

(R)

Number of

shares/share

options

Gain on

sale/exercise (R


Hayward, GRCEmployee Share Option Scheme (note 29)


Shares sold - - - - - -

Balance at December 2014 456,906 -

Options exercised/ shares sold - - - - -


Comprising: 24 May 2007 94 - 24,444 - 23 May 2017

1 April 2008 67 - 19,912 - 31 March 2018

26 May 2008 73 - 36,573 - 25 May 2018

27 May 2009 78 - 105,448 - 26 May 2019

1 September

2011 154 - 120,987 - 31 August 2021

16 May 2012 160 - 149,542 - 15 May 2022



Performance share awards 17 March 2014 - - 32,786 - 16 March 2017

Restricted share grants15 September

2014- - 11,506 -

14 September

2019




2015- - 14,198 -

15 September

2020


Comprising: Performance share awards16 September

2013- - 20,848 -

15 September

2016


2013- - 6,950 -

15 September

2018



2014- - 11,506 -

14 September

2019



2015- - 14,198 -

15 September

2020

Grant dates

Subscription

price (R)

Market price

(R)

Number of

shares/share

options

Gain on

sale/exercise (R


Zwarenstein, IEmployee Share Option Scheme (note 29)


Options exercised - - - - -

Balance at December 2014 167,331 -

Options exercised - - - - - -


Comprising: 26 May 2008 73 - 8,037 - 25 May 2018

27 May 2009 78 - 3,677 - 26 May 2019

1 September

2011 154 - 63,941 - 31 August 2021

16 May 2012 160 - 91,676 - 15 May 2022





Performance share awards - - - - - -


Comprising: Performance share awards16 September

2013- - 12,759 -

15 September

2016


2013- - 4,253 -

15 September

2018

Performance awards 17 March 2014 - - 16,686 - 16 March 2017

van Lierop, J




Restricted share grants 16 March 2015 - - 23,832 - 16 March 2020


2015- - 12,351 -

15 September

2020


Comprising: Performance share awards 16 March 2015 - - 71,495 - 16 March 2018

Restricted share grants 16 March 2015 - - 23,832 - 16 March 2020


2015- - 12,351 -

15 September2020

The Directors interest in the Company’s shares and options held at reporting date can be found in the Director’s Report.



37. Principal subsidiaries

Details of Massmart’s principal subsidiary companies are as follows:

Number of

shares in

issue Place of

incorporation

and operation

Ownership

Voting

power Interest in

Subsidiaries

Name of company 000s % % Principal activity Rm

December 2015

Massbuild Proprietary Limited - South Africa 100 100 Wholesale and retail of DIY products 377.9

Masscash Proprietary Limited - South Africa 100 100 Holding company 1,521.8

Massmart International Holdings Limited - Mauritius 100 100 Holding company 81.4

Masstores Proprietary Limited 200 South Africa 100 100 Retailing, warehousing, mass

merchandising (563.9)

Massmart Management and Finance CompanyProprietary Limited

- South Africa 100 100 Management, investment andfinance

(168.3)

Wild Developments Proprietary Limited - South Africa 100 100 Property Holding Company 122.5

Other smaller subsidiaries - Various 1,603.4

2,974.8

December 2014

Massbuild Proprietary Limited - South Africa 100 100 Wholesale and retail of DIY products 1,124.5

Masscash Proprietary Limited - South Africa 100 100 Holding company 890.0

Massmart International Holdings Limited - Mauritius 100 100 Holding company 81.4

Masstores Proprietary Limited 200 South Africa 100 100 Retailing, warehousing, mass

merchandising (581.9)

Massmart Management and Finance CompanyProprietary Limited

- South Africa 100 100 Management, investment andfinance

12.1

Wild Developments Proprietary Limited - South Africa 100 100 Property Holding Company 122.5

Other smaller subsidiaries - Various 1,561.2

3,209.8

The above details are given in respect of interests in subsidiaries, where material. A full list of subsidiaries is available to shareholders, on request, at the registered office of the Company.

There were no material non-controlling interests identified within the Group in the current and prior financial years.

Interest includes the value of the shares in as well as loans to/from these principal subsidiaries.

1

1



38. Notes to the Statement of Cash Flows



38.1 Cash inflow from trading activities

Profit before taxation 1,675.1 1,620.8

Adjusted for:

Depreciation, amortisation and impairment 971.9 871.2

Net (gain)/loss on disposal of tangible and intangible assets (2.9) 1.4

Interest paid 507.7 386.8

Interest received (32.4) (41.5)

Investment income (54.5) -

Share-based payment expense 218.5 127.9

Unrealised foreign exchange profit (15.0) (2.4)

Other non-cash movements 116.0 19.2

3,384.4 2,983.4

Other non-cash movements includes the lease smoothing liability and any dividends payable at the end of the period.

38.2 Working capital movements

Increase in inventories (705.7) (1,112.4)

Increase in trade receivables and prepayments (481.0) (697.8)

Increase in trade payables 1,617.3 1,658.3

Decrease in provisions (58.6) (143.2)

372.0 (295.1)

38.3 Taxation paid

Normal taxation:

Amounts owing at the beginning of the year (152.0) (319.3)

Amounts owing at the end of the year 104.8 152.0

Receiver of Revenue balance acquired on current year business and asset acquisitions (0.9) (7.1)

Taxation charged to the Income Statement (excluding deferred taxation) (582.9) (509.0)

(631.0) (683.4)

38.4 Investment to maintain operations

Land and buildings/leasehold improvements (134.7) (104.8)

Vehicles (64.7) (92.1)

Fixtures, fittings, plant and equipment (586.3) (427.2)

Computer hardware (105.0) (108.1)

Computer software (92.8) (123.6)

Right of use (0.2) (0.9)

Other - (0.7)

(983.7) (857.4)



38.5 Investment to expand operations

Land and buildings/leasehold improvements (273.8) (936.9)

Vehicles (14.3) (11.0)

Fixtures, fittings, plant and equipment (353.6) (341.7)

Computer hardware (31.4) (12.6)

Computer software (29.6) (7.9)

Capitalised borrowing cost on buildings (8.0) (12.0)

(710.7) (1,322.1)

38.6 Proceeds on disposal of tangible and intangible assets

Land and buildings/leasehold improvements 11.1 9.0

Vehicles 23.8 12.7

Fixtures, fittings, plant and equipment 3.5 10.6

Computer hardware and software 0.3 0.2

38.7 32.5

38.7 Proceeds on disposal of assets classified as held for sale 23.1 -

38.8 Investment in business combinations

Fair value of assets and liabilities acquired in business combinations:

Cash and cash equivalents 21.6 -

Inventories - 0.9

Debtors and prepayments 1.2 -

Creditors (19.0) -

Provisions (9.4) -

Taxation (0.9) -

Tangible assets 1.0 1.4

Intangible assets 44.0 12.1

Total purchase price 38.5 14.4

Less: Cash and cash equivalents of subsidiary (21.6) -

Cash impact of acquisition, net of cash and cash equivalents acquired 16.9 14.4

38.9 Other investing activities

Capital contribution made to the investment in insurance cell-captive on premium contributions - (0.1)

Other 3.9 15.0

3.9 14.9

38.10 Non-controlling interests acquired

Non-controlling interest (41.4) (11.0)

Other reserves – premium on acquisition of non-controlling interests (18.7) (27.6)

(60.1) (38.6)

38.11 Cash and cash equivalents at the end of the year

Cash on hand and bank balances 2,004.9 2,067.4

Bank overdrafts (446.4) (584.0)

Cash and cash equivalents at the end of the year 1,558.5 1,483.4



39. Fair Value

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments identified below. The table below reflects ‘Financial instruments’ and

‘Non-current assets classified as held for sale’ carried at fair value, and those ‘Financial instruments’ and ‘Non-current assets classified as held for sale’ that have carrying amounts that differ

from their fair values, in the Statement of Financial Position:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data

Financial instruments in the Statement of Financial Position

Rm

Total Carrying

Amount

Total Fair Value

Level 1

Level 2

Level 3

December 2015

Financial Assets

Financial assets at fair value through profit or loss 188.1 188.1 - 188.1 -

- Investment in insurance cell-captive on extended warranties 56.2 56.2 - 56.2 -

- Investment in insurance cell-captive on premium contributions 83.0 83.0 - 83.0 -

- Investment in insurance cell-captive on credit life 0.1 0.1 - 0.1 -

- FEC asset – De-designated 48.8 48.8 - 48.8 -

Financial asset designated as a cash flow hedging instrument 20.7 20.7 - 20.7

- FEC asset – Designated 20.7 20.7 - 20.7

Loans and receivables 18.9 13.9 - 13.9 -

- Employee share trust loans 18.9 13.9 - 13.9 -

Available-for-sale investments 4.9 4.9 4.9 - -

- Listed investments 4.9 4.9 4.9 - -

Non-current assets classified as held for sale 11.5 11.5 - - 11.5

244.1 239.1 4.9 222.7 11.5

Financial liabilities

Financial liabilities at amortised cost 2,538.3 2,522.0 - 2,522.0 -

- Medium-term loan 600.0 595.7 - 595.7 -

- Medium-term bank loans 1,938.3 1,926.3 - 1,926.3 -

Financial liabilities at fair value through profit or loss 5.6 5.6 - 5.6 -

- FEC liability – De-designated 5.6 5.6 - 5.6 -

Financial liability designated as a cash flow hedging instrument 2.1 2.1 - 2.1 -

- FEC liability – Designated 2.1 2.1 - 2.1 -

2,546.0 2,529.7 - 2,529.7 -

There were no transfers between the fair value categories during the December 2015 financial year.

The financial assets and financial liabilities have been presented based on an analysis of their respective natures, characteristics and risks.

Financial instruments in the Statement of Financial Position

Rm

Total Carrying

Amount

Total Fair Value

Level 1

Level 2

Level 3

December 2014

Financial Assets

Financial assets at fair value through profit or loss 155.1 155.1 - 155.1 -

- Investment in insurance cell-captive on extended warranties 56.1 56.1 - 56.1 -

- Investment in insurance cell-captive on premium contributions 69.0 69.0 - 69.0 -

- Investment in insurance cell-captive on credit life 0.1 0.1 - 0.1 -

- FEC asset – De-designated 29.9 29.9 - 29.9 -

Financial asset designated as a cash flow hedging instrument 13.7 13.7 - 13.7 -

- FEC asset – Designated 13.7 13.7 - 13.7 -

Loans and receivables 37.6 30.3 - 30.3 -

- Employee share trust loans 37.6 30.3 - 30.3 -

Available-for-sale investments 8.4 8.4 8.4 - -

- Listed investments 8.4 8.4 8.4 - -

Non-current assets classified as held for sale 18.0 22.0 - - 22.0

232.8 229.5 8.4 199.1 22.0


Financial liabilities at amortised cost 2,941.7 2,653.0 - 2,653.0 -

- Medium-term loan 854.5 591.3 - 591.3 -

- Medium-term bank loans 2,087.2 2,061.7 - 2,061.7 -

Financial liabilities at fair value through profit or loss 4.5 4.5 - 4.5 -

- FEC liability – De-designated 4.5 4.5 - 4.5 -

Financial liability designated as a cash flow hedging instrument 2.2 2.2 - 2.2 -

- FEC liability – Designated 2.2 2.2 - 2.2 -

2,948.4 2,659.7 - 2,659.7 -

There were no transfers between the fair value categories during the December 2014 financial year.

The financial assets and financial liabilities have been presented based on an analysis of their respective natures, characteristics and risks.

Fair value measurement and valuation techniques for level 2 and level 3 financial instruments

Rm

Fair value

December 2015

Valuation

technique

Significant inputs

Input

2015

Type of financial instrument

Financial Assets

Financial assets at fair value through profit or loss 188.1

Investment in insurance cell-captive on extended warranties 56.2 NAV Cash and cash

equivalents

Investment in unit

trusts

Insurance fund

liabilities

Investment in insurance cell-captive on premium contributions 83.0 NAV Cash and cash

equivalents

Investment in unit

trusts

Insurance fund

liabilities

Investment in insurance cell-captive on credit life 0.1 NAV Cash and cash

equivalents

FEC asset – De-designated 48.8 DCF

Yield curves

Market interest rate

Market foreign

exchange rate

20.7

FEC asset – Designated 20.7 DCF

Yield curves


Market foreign

exchange rate

Loans and receivables 13.9

Employee share trust loans 13.9 DCF Market interest rate

Available-for-sale financial assets 4.9

Listed investments 4.9

11.5

Non-current assets classified as held for sale 11.5 Signed sales

agreement

Expected selling

price in the market 11.5

239.1


Financial liabilities at amortised cost 2,522.0

Medium-term loan 595.7 DCF Market interest rate

Medium-term bank loans 1,926.3 DCF Market interest rate

Financial liabilities at fair value through profit or loss 5.6

FEC liability – De-designated 5.6 DCF

Yield curves


Market foreign

exchange rate

2.1

FEC liability – Designated 2.1 DCF

Yield curves


Market foreign

exchange rate

2,529.7

Valuation technique Description of valuation technique

Net asset value (NAV)

Net asset value is used as a valuation technique where the underlying assets and

liabilities have been assessed to represent the fair value of the investment. Due to the

nature of the investment, specifically the significant composition of liquid assets and

liabilities, the net asset value is seen to be the most appropriate representation of fair

value.

Discounted cash flow (DCF)

The DCF method involves the projection of a series of cash flows. To this projected cash

flow series, an appropriate, market-derived discount rate is applied to establish the

present value of the cash flow stream associated with the item. With regards to assets,

the fair value is estimated using explicit assumptions regarding the benefits and

liabilities of ownership over the asset’s life including an exit or terminal value. With

regards to liabilities, in determining fair value management considers non-performance

risk and the Group’s own credit risk. To this end, the Group applies Method 2 of the

expected present value technique per IFRS 13 Fair Value Measurement.

Fair value measurement and valuation techniques for level 2 and level 3 financial instruments

Rm

Fair value

December 2014

Valuation

technique

Significant inputs

Input 2014

Type of financial instrument

Financial Assets

Financial assets at fair value through profit or loss 155.1

Investment in insurance cell-captive on extended warranties 56.1 NAV Cash and cash

equivalents

Investment in unit

trusts

Insurance fund

liabilities

Investment in insurance cell-captive on premium contributions 69.0 NAV Cash and cash

equivalents

Investment in unit

trusts

Insurance fund

liabilities

Investment in insurance cell-captive on credit life 0.1 NAV Cash and cash

equivalents

Insurance fund

liabilities

FEC asset – De-designated 29.9 DCF

Yield curves


Market foreign

exchange rate

13.7

FEC asset – Designated 13.7 DCF

Yield curves Market

interest rate Market

foreign exchange

rate

Loans and receivables 30.3

Employee share trust loans 30.3 DCF Market interest rate

Available-for-sale financial assets 8.4

Listed investments 8.4

22.0

Non-current assets classified as held for sale 22.0 Signed sales

agreement

Expected selling

price in the market 22.0

229.5


Financial liabilities at amortised cost 2,653.0

Medium-term loan 591.3 DCF Market interest rate

Medium-term bank loans 2,061.7 DCF Market interest rate

Financial liabilities at fair value through profit or loss 4.5

FEC liability – De-designated 4.5 DCF

Yield curves


Market foreign

exchange rate

2.2

FEC liability – Designated 2.2 DCF

Yield curves


Market foreign

exchange rate

2,659.7

Valuation technique Description of valuation technique

Net asset value (NAV)

Net asset value is used as a valuation technique where the underlying assets and

liabilities have been assessed to represent the fair value of the investment. Due to the

nature of the investment, specifically the significant composition of liquid assets and

liabilities, the net asset value is seen to be the most appropriate representation of fair

value.

Discounted cash flow (DCF)

The DCF method involves the projection of a series of cash flows. To this projected cash

flow series, an appropriate, market-derived discount rate is applied to establish the

present value of the cash flow stream associated with the item. With regards to assets,

the fair value is estimated using explicit assumptions regarding the benefits and

liabilities of ownership over the asset’s life including an exit or terminal value. With

regards to liabilities, in determining fair value management considers non-performance

risk and the Group’s own credit risk. To this end, the Group applies Method 2 of the

expected present value technique per IFRS 13 Fair Value Measurement.




40. Risk Management

Capital risk management

The Group measures its capacity for debt by monitoring gross interest bearing debt (including a 5 times multiple of rent) over EBITDAR and EBITDA divided by net interest. Provided

that these two metrics are within target ranges (agreed with the Group’s Audit Committee and lenders from time to time), the Group is satisfied that it will continue as a going concern

while maximising the return to stakeholders through the optimisation of debt and equity balances.

The capital structure of the Group consists of debt, more specifically medium-term interest-bearing debt and equity attributable to owners of the parent, comprising share capital, share

premium, other reserves and retained profit (See note 22 and note 23 respectively).

The targeted level of gearing is determined after consideration of the following key factors :

- the needs of the Group to fund current and future capital expenditure to achieve its stated production growth target; and

- the desire of the Group to maintain its gearing within levels considered to be acceptable taking into account potential business opportunities and the position of the Group in the

business cycle.

The targeted level of gearing was adequately managed in the current financial year.

The Group has medium-term debt facilities that include certain covenants, including:

- maximum gearing ratio;

- minimum interest cover; and

- specified levels of shareholders’ equity.

The Group’s general banking facility can be analysed as follows:

Rm

December

2015

December

2014

Available cash reserves 1,558.5 1,483.4

General banking facility 5,493.9 5,478.3

Total 7,052.4 6,961.7

The Group complies with all externally imposed capital requirements relating to loan covenants.

Classification of financial instruments

December 2015

Financial

instrument

Cash flow –

hedging

instrument

Designated

at FVTPL

Liability at

amortised

cost

Loans and

receivables

Available-

for-sale

financial

instruments

Non-financial

instruments

Rm

ASSETS

Non-current assets

Property, plant and equipment - - - - - - 8,117.8

Goodwill - - - - - - 2,589.4

Intangibles assets - - - - - - 409.7

Investments 145.5 - 139.3 - 1.3 4.9 -

- Investment in insurance cell-captive on extended

warranties 56.2 - 56.2 - - - -

- Investment in insurance cell-captive on premium

contributions 83.0 - 83.0 - - - -

- Investment in insurance cell-captive on credit life 0.1 - 0.1 - - - -

- Trencor export partnership 1.3 - - - 1.3 - -

- Other listed investments 4.9 - - - - 4.9 -

Other financial assets 19.6 - - - 19.6 - -

- Housing and staff loans 0.7 - - - 0.7 - -

- Employee share trust loans 18.9 - - - 18.9 - -

Deferred taxation - - - - - - 749.2

Current assets

Inventories - - - - - - 11,934.5

Trade and other receivables 4,423.3 20.7 48.8 - 4,353.8 - 274.1

- Trade receivables 2,249.7 - - - 2,249.7 - -

- Other accounts receivable and prepayments 2,104.1 - - - 2,104.1 - 274.1

- FEC asset 69.5 20.7 48.8 - - - -

Taxation - - - - - - 50.8

Cash on hand and bank balances 2,004.9 - - - 2,004.9 - -

Non-current assets classified as held for sale - - - - - - 11.5

Total assets 6,593.3 20.7 188.1 - 6,379.6 4.9 24,137.0

Non-current liabilities

Non-current liabilities – interest-bearing borrowings 1,819.6 - - 1,819.6 - - -

- Medium-term loans 600.0 - - 600.0 - - -

- Medium-term bank loans 1,210.0 - - 1,210.0 - - -

- Capitalised finance lease 9.6 - - 9.6 - - -

Non-current liabilities – interest-free borrowings 2.1 - - 2.1 - - 1,033.4

- Loans to non-controlling interests 2.1 - - 2.1 - - -

- Other - - - - - - 11.5

- Operating lease liability - - - - - - 1,021.9

Provisions - - - - - - 124.8


Current liabilities

Trade and other payables 18,690.9 2.1 5.6 18,683.2 - - 1,236.8

- Trade payables 16,320.4 - - 16,320.4 - - -

- FEC liability 7.7 2.1 5.6 - - - -

- Rebates and advertising to buying members 141.1 - - 141.1 - - -

- Interest accrual 38.3 - - 38.3 - - -

- Amounts due to Walmart 299.4 - - 299.4 - - -

- Sundry payables and other accruals 1,884.0 - - 1,884.0 - - 1,236.8

Provisions and other - - - - - - 150.0

Other current liabilities 1,206.1 - - 1,206.1 - - -


- Medium-term bank loans 728.3 - - 728.3 - - -


Taxation - - - - - - 155.6

Bank overdrafts 446.4 - - 446.4 - - -

Total liabilities 22,165.1 2.1 5.6 22,157.4 - - 2,774.1

December 2014

Financial

instrument

Cash flow –

hedging

instrument

Designated

at FVTPL

Liability at

amortised

cost

Loans and

receivables

Available-

for-sale

financial

instruments

Non-financial

instruments

Rm

ASSETS

Non-current assets

Property, plant and equipment - - - - - - 7,239.2

Goodwill - - - - - - 2,542.9

Intangibles assets - - - - - - 415.8

Investments 135.3 - 125.2 - 1.7 8.4 -

- Investment in insurance cell-captive on extended

warranties 56.1 - 56.1 - - - -

- Investment in insurance cell-captive on premium

contributions 69.0 - 69.0 - - - -

- Investment in insurance cell-captive on credit life 0.1 - 0.1 - - - -

- Trencor export partnership 1.7 - - - 1.7 - -

- Other listed investments 8.4 - - - - 8.4 -

Other financial assets 22.9 - - - 22.9 - -

- Housing and staff loans 0.4 - - - 0.4 - -



Current assets

Other current financial assets 229.3 - - - 229.3 - -


- Property loan 214.2 - - - 214.2 - -

Inventories - - - - 11,228.8

Trade and other receivables 4,024.5 13.7 29.9 - 3,980.9 - 263.8

- Trade receivables 2,107.1 - - - 2,107.1 - -

- Other accounts receivable and prepayments 1,873.8 - - - 1,873.8 - 263.8

- FEC asset 43.6 13.7 29.9 - - - -

Taxation - - - - - - 56.3

Cash on hand and bank balances 2,067.4 - - - 2,067.4 - -

Non-current assets classified as held for sale - - - - - - 18.0

Total assets 6,479.4 13.7 155.1 - 6,302.2 8.4 22,427.0

Non-current liabilities

Non-current liabilities – interest-bearing borrowings 2,133.9 - - 2,133.9 - - -


- Medium-term bank loans 1,521.7 - - 1,521.7 - - -


Non-current liabilities – interest-free borrowings 2.1 - - 2.1 - - 924.5

- Loans to non-controlling interests 2.1 - - 2.1 - - -

- Operating lease liability - - - - - - 911.2

- Other - - - - - - 13.3

Provisions - - - - - - 115.0


Current liabilities

Trade and other payables 17,148.9 2.2 4.5 17,142.2 - - 1,174.6

- Trade payables 14,841.5 - - 14,841.5 - - -

- FEC liability 6.7 2.2 4.5 - - - -

- Rebates and advertising to buying members 129.0 - - 129.0 - - -

- Shareholders for dividends 10.5 - - 10.5 - - -

- Interest accrual 32.1 - - 32.1 - - -

- Amounts due to Walmart 218.3 - - 218.3 - - -

- Sundry payables and other accruals 1,910.8 - - 1,910.8 - - 1,174.6

Provisions and other - - - - - - 195.4

Other current liabilities 831.2 - - 831.2 - - -


- Medium-term bank loans 565.5 - - 565.5 - - -


Taxation - - - - - - 208.3

Bank overdrafts 584.0 - - 584.0 - - -

Total liabilities 20,700.1 2.2 4.5 20,693.4 - - 2,679.1

Financial risk management

The Group does not trade in financial instruments, but in the ordinary course of business operations, the Group is exposed to a variety of financial risks arising from the use of financial

instruments. These risks include:

- market risk (comprising interest rate risk and currency risk);

- liquidity risk; and

- credit risk.

The Group has developed a comprehensive risk management process to facilitate, control and monitor these risks. This process includes formal documentation of policies, including

limits, controls and reporting structures. The Executive Committee is responsible for risk management activities within the Group.

Market risk management

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The market risks that the Group is primarily

exposed to include interest rate risk and currency risk. Market risk is managed by identifying and quantifying risks on the basis of current and future expectations and ensuring that all

trading occurs within defined parameters. This involves the review and implementation of methodologies to reduce risk exposure. The reporting on the state of the risk and risk

practices to the Executive Committee of the Group is part of this process. There has been no change to the Group’s exposure to market risk or the manner in which it manages and

measures the risk since the prior financial year.

Interest rate risk management

During the year, the surplus cash position of the Group remained fairly constant with that of the prior year. The size of the Group’s position, be it either surplus cash or borrowings,

exposes it to interest rate risk. The interest-bearing loan funding requirements and the investment of surplus cash funds are managed by the Group through its own commercial bank

facilities.

The carrying amount of the Group’s financial assets and liabilities at reporting date that are subject to interest rate risk are as follows :

December 2015 Subject to interest rate

movement

Non-interest

bearing

Total

Rm Fixed Floating

ASSETS

Financial assets

Investments - 1.3 144.2 145.5

- Investment in insurance cell-captive on extended warranties - - 56.2 56.2

- Investment in insurance cell-captive on premium contributions - - 83.0 83.0

- Investment in insurance cell-captive on credit life - - 0.1 0.1

- Trencor export partnership - 1.3 - 1.3

- Other listed investments - - 4.9 4.9

Other financial assets 0.7 - 18.9 19.6

- Housing and staff loans 0.7 - - 0.7

- Employee share trust loans - - 18.9 18.9

Other current financial assets - - - -

- Employee share trust loans - - - -

- Property loan - - - -

Trade and other receivables - 7.7 4,415.6 4,423.3

- Trade receivables - - 2,249.7 2,249.7

- Other accounts receivable and prepayments - 7.7 2,096.4 2,104.1

- FEC asset - - 69.5 69.5

Cash on hand and bank balances - 1,885.2 119.7 2,004.9

Total financial assets 0.7 1,894.2 4,698.4 6,593.3


Non-current liabilities – interest-bearing borrowings 1,810.0 9.6 - 1,819.6

- Medium-term loans 600.0 - - 600.0

- Medium-term bank loans 1,210.0 - - 1,210.0

- Capitalised finance lease - 9.6 - 9.6

Non-current liabilities – interest-free borrowings - - 2.1 2.1

- Loans to non-controlling interests - - 2.1 2.1

Trade and other payables - - 18,690.9 18,690.9

- Trade payables - - 16,320.4 16,320.4

- FEC liability - - 7.7 7.7

- Rebates and advertising to buying members - - 141.1 141.1

- Interest accrual - - 38.3 38.3

- Amounts due to Walmart - - 299.4 299.4

- Sundry payables and other accruals - - 1,884.0 1,884.0

Other current liabilities 728.3 477.8 - 1,206.1

- Medium-term loans - 469.0 - 469.0

- Medium-term bank loans 728.3 - - 728.3


Bank overdrafts - 446.4 - 446.4

Total financial liabilities 2,538.3 933.8 18,693.0 22,165.1

December 2014 Subject to interest rate

movement

Non-interest

bearing

Total

Rm Fixed Floating

ASSETS

Financial assets

Investments - 1.7 133.6 135.3

- Investment in a trading and logistics structure - - 56.1 56.1

- Investment in insurance cell-captive on extended warranties - - 69.0 69.0

- Investment in insurance cell-captive on premium contributions - - 0.1 0.1

- Trencor export partnership - 1.7 - 1.7

- Other listed investments - - 8.4 8.4

Other financial assets 0.4 - 22.5 22.9

- Housing and staff loans 0.4 - - 0.4


Other current financial assets 214.2 - 15.1 229.3


- Property loan 214.2 - - 214.2

Trade and other receivables - 14.2 4,010.3 4,024.5

- Trade receivables - - 2,107.1 2,107.1

- Other accounts receivable and prepayments - 14.2 1,859.6 1,873.8

- FEC asset - - 43.6 43.6

Cash on hand and bank balances 7.6 1,968.0 91.8 2,067.4

Total financial assets 222.2 1,983.9 4,273.3 6,479.4


Non-current liabilities – interest-bearing borrowings 2,121.7 12.2 - 2,133.9

- Medium-term loans 600.0 - - 600.0

- Medium-term bank loans 1,521.7 - - 1,521.7


Non-current liabilities – interest-free borrowings - - 2.1 2.1

- Loans to non-controlling interests - - 2.1 2.1

Trade and other payables - - 17,148.9 17,148.9

- Trade payables - - 14,841.5 14,841.5

- FEC liability - - 6.7 6.7

- Rebates and advertising to buying members - - 129.0 129.0

- Shareholders for dividends - - 10.5 10.5

- Interest accrual - - 32.1 32.1

- Amounts due to Walmart - - 218.3 218.3

- Sundry payables and other accruals - - 1,910.8 1,910.8

Other current liabilities 565.5 265.7 - 831.2

- Medium-term loans - 254.5 - 254.5

- Medium-term bank loans 565.5 - - 565.5


Bank overdrafts - 584.0 - 584.0

Total financial liabilities 2,687.2 861.9 17,151.0 20,700.1

Interest rate sensitivity

The Group is sensitive to the movements in the SA Prime interest rate. The rates of sensitivity represents management’s assessment of the possible change in interest rates. The average

interest rate for the Group for the year was 7.82% (December 2014: 7.20%), and the variable interest paid was R250.0 million (December 2014: R201.6 million). If the SA Prime interest rate

increased and decreased by 100 average basis points (December 2014: increased and decreased by 100 average basis points) at year end, the net finance costs for the year would have

decreased and increased by R10.4 million respectively (December 2014: decreased and increased by R13.3 million respectively). Although the Group is exposed to the USD LIBOR rate,

this exposure is not considered to be significant.

Currency risk management

All foreign-denominated trading liabilities are covered by forward exchange contracts. Foreign-denominated assets and other foreign-denominated liabilities are not covered by

forward exchange contracts.

The carrying amount of the Group’s foreign currency denominated monetary assets at reporting date is as follows :

December 2015South African

Rand

USD

Euro

Pula

Metical

Cedi

Other

Total

Rm

Investments 12.5 - - - 122.5 6.1 4.4 145.5

Trade and other receivables and other

financial assets 15,468.0 51.3 0.9 244.7 81.5 5.3 (176.2) 15,675.5

Cash on hand and bank balances 1,335.3 53.3 0.3 284.8 121.6 33.7 175.9 2,004.9

Total 16,815.8 104.6 1.2 529.5 325.6 45.1 4.1 17,825.9

December 2014South African

Rand

USD

Euro

Other

Total

Rm

Investments 127.8 - - 7.5 135.3

Trade receivables 4,006.4 43.4 0.2 203.8 4,253.8

Cash on hand and bank balances 1,378.2 95.6 18.6 575.1 2,067.5

Total 4,552.7 37.7 18.8 786.4 6,456.6

‘Other’ comprise the balance of the currencies per table below.

Foreign currency sensitivity

For further information regarding the forex movements for the year, refer to note 7.

The table below indicates the Group’s sensitivity at year end to movements in the relevant foreign currencies on monetary items, excluding forward exchange contracts. The rates of

sensitivity are the rates used when reporting the currency risk to the Executive Committee of the Group and represents management’s assessment of the possible change in reporting

foreign currency exchange rates. The rate sensitivity remained constant in the current financial year at 10% in light of the significant devaluation of the Rand in the current year. For each

10% increase, profit or loss is increased and the financial asset is increased, for each 10% decrease, profit or loss is decreased and the financial asset is decreased.


Spot rate

10%

increase

10%

decrease

10%

increase

10%

decrease

Currency Rm Rm Spot rate Rm Rm

USD 15.2274 8.6 (8.6) 11.5995 1.8 (1.8)

Pound Sterling 22.5926 1.4 (1.4) 18.0449 - -

Euro 16.7150 0.1 (0.1) 14.1944 0.2 (0.2)

Botswana Pula 1.3741 0.1 (0.1) 1.2157 1.1 (1.1)

Ghanaian New Cedi 3.9920 0.6 (0.6) 3.6107 1.6 (1.6)

Kenyan Shilling 0.1488 0.5 (0.5) 0.1281 - -

Malawian Kwacha 0.0234 0.2 (0.2) 0.0249 1.9 (1.9)

Mozambican New Metical 0.4236 5.3 (5.3) 0.3458 2.0 (2.0)

Nigerian Naira 0.3145 2.6 (2.6) 0.0634 0.5 (0.5)

Tanzanian Shilling 0.0765 - - 0.0068 0.1 (0.1)

Uganda Shilling 0.0071 1.1 (1.1) 0.0042 0.1 (0.1)

Zambian Kwacha 0.0045 0.9 (0.9) 0.1281 0.2 (0.2)

Forward foreign exchange contracts

Forward exchange contracts are entered into to manage exposure to fluctuations in foreign currency exchange rates on specific trading transactions. The Group’s policy is to enter into

forward contracts for all committed foreign currency purchases to hedge the Group’s exposure to variability in cash flows. For more information refer to note 7. There are no other

hedges in the Group.

December 2015 Foreign

currency

Fair value

adjustment

Average

exchange

rate

At year end, the open forward exchange contracts were as follows: (millions) Rm

USD 40.9 61.4 13.9

Sterling - - 24.2

Euro 0.3 0.4 15.7

Total 61.8

December 2014 Foreign

currency

Fair value

adjustment

Average

exchange

rate

At year end, the open forward exchange contracts were as follows: (millions) Rm

USD 68.9 36.7 11.3

Sterling 0.2 - 18.1

Euro 0.6 0.2 14.2

Total 36.9

1

1

1

The fair value adjustment represents the balance at the end of the current financial year and is included in Trade and other receivables (FEC asset balance) and included in Trade and

other payables (FEC liability balance). As the average duration is three months, these FEC balances would be derecognised and the resulting impact would be accounted for in cost of

sales and in foreign exchange gains/(losses) in the Income Statement within the next financial year for both periods under review.

During the December 2015 financial year an amount of R3.2 million (December 2014: R1.0 million) (net of tax) relating to the FEC hedges was recognised in other comprehensive

income. For more information on the movement in the hedging reserve refer to note 23.

Forward foreign exchange contracts sensitivity

The following table indicates the Group’s sensitivity of the outstanding forward exchange contracts at the reporting date to movements in the USD. The USD is the primary currency in

which the Group has entered into forward foreign exchange contracts. The rates of sensitivity are the rates used when reporting the currency risk to the Executive Committee of the

Group and represents management’s assessment of the possible change in foreign currency exchange rates. The Rand/USD year end rate was R15.23 (December 2014: R11.60).


December 2015 USD USD USD USD

Rm

5% increase

5%

decrease

5% increase

5%

decrease

Profit/(loss) 21.5 (21.5) 12.3 (12.3)

Derivative financial assets/(liabilities) 26.1 (26.1) 13.8 (13.8)

Equity 4.6 (4.6) 1.5 (1.5)

Liquidity risk management

Liquidity risk is the risk that the Group will be unable to meet a financial commitment in any location or currency. This risk is minimised through the holding of cash balances and

sufficient available borrowing facilities (refer to note 24). In addition, detailed cash flow forecasts are regularly prepared and reviewed so that the cash needs of the Group are managed

according to its requirements.

The following table details the Group’s contractual maturity for its financial liabilities. The table has been compiled based on the undiscounted cash flows of financial liabilities based on

the earliest date on which the Group can be required to repay the liability. The cash flows include both the principal and estimated interest payments.

December 2015 Repayable Repayable

Total

Rm

within 1

year

1 – 5 years


Non-current and current liabilities – interest-bearing borrowings 1,380.8 1,995.9 3,376.7

- Medium-term loans 504.4 658.5 1,162.9

- Medium-term bank loans 866.8 1,327.3 2,194.1

- Capitalised finance lease 9.6 10.1 19.7

Non-current liabilities – interest-free borrowings - 2.1 2.1

- Loans to non-controlling interests - 2.1 2.1

Trade and other payables 18,690.9 - 18,690.9

- Trade payables 16,320.4 - 16,320.4

- FEC liability 7.7 - 7.7

- Sundry payables and other accruals 2,362.8 - 2,362.8

Bank overdrafts 446.4 - 446.4

Total undiscounted cash flows of the Group’s financial liabilities 20,518.1 1,998.0 22,516.1

Less: Future finance charges (351.0)

Total financial liabilities 22,165.1

Included in future finance charges is R1.4 million that relates to finance leases. Finance charges of R0.9 million are repayable in year 1 and R0.5 million in years 1 – 5, respectively.

December 2014 Repayable Repayable

Total

Rm

within 1

year

1 – 5 years


Non-current and current liabilities – interest-bearing borrowings 1,025.4 2,445.5 3,470.9

- Medium-term loans 299.3 703.2 1,002.5

- Medium-term bank loans 714.1 1,729.5 2,443.6

- Capitalised finance lease 12.0 12.8 24.8

Non-current liabilities – interest-free borrowings - 2.1 2.1

- Loans to non-controlling interests - 2.1 2.1

Trade and other payables 17,148.9 - 17,148.9

- Trade payables 14,841.5 - 14,841.5

- FEC liability 6.7 - 6.7

- Sundry payables and other accruals 2,300.7 - 2,300.7

Bank overdrafts 584.0 - 584.0

Total undiscounted cash flows of the Group’s financial liabilities 18,758.3 2,447.6 21,205.9

Less: Future finance charges (505.8)

Total financial liabilities 20,700.1

Included in future finance charges is R5.6 million that relates to finance leases. Finance charges of R4.3 million are repayable in year 1 and R1.3 million in years 1 – 5, respectively.

The effect of discounting on the current medium-term loan amounts are deemed immaterial.

The average duration of the FEC’s are three months, so they would fall in the repayable within one year for both periods under review. The FEC’s are settled on a net basis.

Credit risk management

The carrying amount of the financial assets represents the Group’s maximum exposure to credit risk without taking into consideration any collateral provided. Other than R1.3 million

(December 2014:R1.7 million) relating to the Trencor Partnership that is considered to be of medium credit risk, all other loans and receivables are considered to be of low credit risk for

the current and prior financial year.

Potential areas of credit risk include trade receivables and short-term loans and cash investments. Credit risk arises from the risk that a counterparty may default or not meet its

obligations timeously. Trade accounts receivable consist primarily of a large, widespread customer base. Group companies regularly monitor the financial position of their customers.

Where considered appropriate, credit guarantee insurance is used. The granting of credit is controlled by application and account limits. Provision is made for both specific and general

portfolio impairments, and at the year end management did not consider there to be any material credit risk exposure that was not already covered by credit guarantee insurance or

portfolio impairment provisions. The carrying amounts of the financial assets above represent the Group’s maximum credit risk exposure. Additional information relating to trade and

other receivables can be found in note 20.

At year end no loans and receivables were pledged as security. At year end, security with a fair value of R71.1 million (December 2014: R30.5 million) is held by the Group. During the

current year the Group did not take possession of security it held over its loans and receivables.




41. Segmental reporting

Operating segments

The Group is organised into four Divisions for operational and management purposes, being Massdiscounters, Masswarehouse, Massbuild and Masscash. Massmart reports its operating

segment information on this basis. The principal offering for each Division is as follows:

Massdiscounters – general merchandise discounter and food retailer

Masswarehouse – warehouse club trading in food, general merchandise and liquor

Massbuild – home improvement retailer and building materials supplier

Masscash – food wholesaler, retailer and buying association

No single customer represented more than 10% of any of one of the Divisions’ revenue in the current and prior financial year.

Rm Total Other Massdiscounters Masswarehouse Massbuild Masscash

December 2015

Sales 84,731.8 - 19,514.1 23,675.9 12,010.6 29,531.2

Operating profit before foreign exchange movements and

interest 2,300.2 (39.8) 235.4 1,198.7 693.6 212.3

Trading profit before interest and taxation 2,349.7 - 235.4 1,198.7 693.6 222.0

Net foreign exchange loss (149.8) (78.1) (65.4) - (3.4) (2.9)

Net finance (costs)/income (475.3) (292.6) (49.5) 53.0 (100.7) (85.5)

Operating profit/(loss) before taxation 1,675.1 (410.5) 120.5 1,251.7 589.5 123.9

Trading profit/(loss) before taxation 1,874.4 (292.6) 185.9 1,251.7 592.9 136.5

Inventory 11,934.5 22.1 4,064.7 3,095.7 1,865.3 2,886.7

Total assets 30,730.3 (626.7) 8,234.5 8,314.0 5,122.1 9,686.4

Non-current asset held for sale 11.5 11.5 - - - -

Total liabilities 24,939.2 (4,608.9) 7,999.0 7,865.3 4,602.8 9,081.0

Net capital expenditure 1,649.6 186.8 527.4 234.4 351.6 349.4

Depreciation and amortisation 946.2 62.0 336.0 169.5 184.8 193.9

Impairment losses 25.7 16.0 - - - 9.7

Non-cash items other than depreciation and impairment 316.6 101.7 133.0 39.7 6.6 35.6

Cash flow from operating activities 1,770.4 450.6 276.1 259.0 1,095.1 (310.4)

Cash flow from investing activities (1,645.6) (183.2) (527.2) (234.4) (351.6) (349.2)

Cash flow from financing activities (25.5) (60.9) 166.2 (71.5) (712.0) 652.7

Inventory days 63.4 - 102.3 57.2 80.0 39.6

Number of stores 403 - 161 19 102 121

Trading area (m ) 1,550,719 - 533,078 195,794 449,133 372,714

Trading area (m ) increase on December 2014 0.7% - 5.3% - 2.9% -7.0%

Average trading area per store (m ) 3,848 - 3,311 10,305 4,403 3,080

Distribution centre space (m ) 346,660 - 178,488 58,475 60,235 49,462

Distribution centre space (m ) increase on December 2014 5.6% - - 14.0% -2.4% 34.9%

2

2

2

2

2

Rm Total Other Massdiscounters Masswarehouse Massbuild Masscash

December 2014

Sales 78,173.2 - 17,955.2 21,554.8 10,822.8 27,840.4Operating profit before foreign exchange movements andinterest

2,015.9 (30.6) 180.7 1,044.3 537.6 283.9

Trading profit before interest and taxation 2,061.7 - 180.7 1,044.3 537.6 299.1

Net foreign exchange (loss)/ gain (49.8) (48.4) (5.8) - 2.5 1.9

Net finance (costs)/income (345.3) (211.0) (29.4) 44.4 (63.2) (86.1)

Operating profit before taxation 1,620.8 (290.0) 145.5 1,088.7 476.9 199.7

Trading profit before taxation 1,716.4 (211.0) 151.3 1,088.7 474.4 213.0

Inventory 11,228.8 30.5 3,984.9 2,845.7 1,785.6 2,582.1

Total assets 28,906.4 (325.6) 7,985.5 7,689.0 5,027.7 8,529.8

Non-current asset held for sale 18.0 15.0 - - 3.0 -

Total liabilities 23,379.2 (4,366.5) 7,820.9 7,312.1 4,730.6 7,882.0

Net capital expenditure 2,147.0 967.8 542.2 70.3 296.8 269.9

Depreciation and amortisation 846.6 43.2 293.1 171.6 154.0 184.7

Impairment losses 24.6 9.4 - - - 15.2

Non-cash items other than depreciation and impairment 146.1 (16.2) 112.0 46.9 12.6 (9.2)

Cash flow from operating activities 745.6 (446.2) 473.4 (103.8) 707.4 114.8

Cash flow from investing activities (2,146.5) (980.8) (545.0) (70.1) (296.8) (253.8)

Cash flow from financing activities 1,349.7 1,163.0 112.9 161.8 (369.3) 281.3

Inventory days 64.4 - 107.6 57.1 84.6 37.1

Number of stores 392 - 153 19 100 120

Trading area (m ) 1,539,295 - 506,188 195,794 436,538 400,775

Trading area (m ) increase on December 2013 (excluding

re-measurements) 3.9% - 6.5% - 6.3% 0.3%

Average trading area per store (m ) 3,927 - 3,308 10,305 4,365 3,340

Distribution centre space (m ) 328,175 - 178,488 51,300 61,733 36,654

Distribution centre space (m ) increase on December 2013 1.3% - - - 0.0% 13.5%

The other column includes consolidation entries.

All intercompany transactions have been eliminated in the above results.

Additional information can be found in ‘Our Customers’ and the ‘Chief Financial Officer’s Review’ in the Group’s Integrated Annual Report.

Trading profit before taxation is earnings before corporate net interest, asset impairments, BEE transaction IFRS 2 charges and foreign exchange movements.

Net capital expenditure is defined as capital expenditure less disposal proceeds.

Geographic segments

The Group’s four Divisions operate in two principal geographical areas – South Africa and the rest of Africa.


52 weeks 52 weeks

Total South Africa Rest of Africa Total South Africa Rest of Africa

Sales 84,731.8 77,579.2 7,152.6 78,173.2 71,822.4 6,350.8

Segment assets (Total) 23,387.8 21,541.2 1,846.6 21,764.8 20,226.3 1,538.5

Segment assets (Non-current) 11,128.4 10,118.7 1,009.7 10,197.9 9,576.5 621.4

Net capital expenditure 1,649.6 1,366.1 283.5 2,147.0 1,936.6 210.4

All intercompany transactions have been eliminated in the above results.

Segment assets excludes financial instruments and deferred taxation and reflects the geographic location of the Group’s assets.

Net capital expenditure is defined as capital expenditure less disposal proceeds.

2

2

2

2

2



42. Value Added Statement


52 weeks 52 weeks

Rm % Rm %

Sales 84,731.8 78,173.2

Cost of sales (68,689.6) (63,610.8)

Other revenue and interest received 158.0 187.3

Net costs of services and other operating expenses (6,263.3) (5,771.1)

Value added 9,936.9 8,978.6

Applied as follows :

To employees as salaries, wages and other benefits 6,784.3 68.3 6,109.0 68.0

To Government as taxation (excluding VAT) 505.9 5.1 483.4 5.5

To shareholders as dividends 914.1 9.2 914.0 10.2

To lenders as interest 507.7 5.1 386.8 4.3

Depreciation and amortisation 946.2 9.5 846.6 9.4

Non-controlling interests 56.4 0.6 57.6 0.6

CSI 23.7 0.2 15.3 0.2

Net earnings retained 198.6 2.0 165.9 1.8

9,936.9 100.0 8,978.6 100.0



43. Events after the reporting date

The Group concluded a Term Loan Facility Agreement with Standard Bank as lender in February 2016. In terms of the agreement Standard Bank advanced R2 billion to the Group on 26

February 2016. The agreement includes a R600m facility that will mature in three years and a R1.4 billion facility that will mature in five.

A fire was reported at the Jumbo Cash & Carry store in Crown Mines, Johannesburg, on 25 February 2016. All night shift employees were safely evacuated, fully accounted for and no one

was injured. In situations such as this the cause of the fire is investigated after the site has been declared to be safe. The investigation is typically conducted by teams from the Fire

Department, South African Police Services and the insurers. The value of stock that is carried in the store is estimated, at this early stage, to be approximately R100 million. The store, assets

and stock are fully insured.

With the exception of the above, there were no significant subsequent events after year end.



44. Shareholder analysis

The following analysis of shareholders was extracted from the shareholders register:

Number of

holders

%

Number of

shares

%

Shareholder spread

1 – 1,000 shares 3,509 82.7 671,904 0.3

1,001 – 10,000 shares 521 12.3 1,644,550 0.8

10,001 – 100,000 shares 130 3.1 4,311,634 2.0

100,001 – 1,000,000 shares 59 1.4 19,244,746 8.9

1,000,001 shares and over 23 0.5 191,263,500 88.0

4,242 100.0 217,136,334 100.0

Public/non-public shareholders

Non-public shareholders:

Walmart subsidiary: Main Street 830 Proprietary Limited 1 - 113,859,293 52.4

Directors and Group Executives of the Company 3 0.1 242,494 0.1

Share trusts 1 - 575,563 0.3

Public shareholders 4,237 99.9 102,458,984 47.2

4,242 100.0 217,136,334 100.0

Number of

holder

%

Number of

shares

%

Distribution of shareholders

Walmart subsidiary: Main Street 830 Proprietary Limited 1 - 113,859,293 52.4

Unit Trusts/Mutual Funds 91 2.2 51,401,292 23.7

Pension Funds 57 1.3 23,539,015 10.8

Other Managed Funds 46 1.1 7,252,920 3.3

Sovereign Wealth 14 0.3 7,243,931 3.3

Custodians 10 0.2 4,550,139 2.1

Private Investors 11 0.3 1,910,514 0.9

Hedge Fund 1 - 1,930,510 0.9

Investment Trusts 3 0.1 1,185,192 0.5

Insurance Companies 4 0.1 1,012,682 0.5

Charities 3 0.1 776,622 0.4

Exchange-Traded Fund Total 4 0.1 557,532 0.3

University 1 - 144,925 0.1

Local Authorities 1 - 30,166 -

Remainder 3,995 94.2 1,741,601 0.8

4,242 100.0 217,136,334 100.0

Custodians and managers holding 3% or more

The following custodians and managers held beneficially, directly or indirectly, equal to or

in excess of 3% of the Company’s shares:

Walmart subsidiary: Main Street 830 Proprietary Limited 113,859,293 52.4

Aberdeen Asset Management Group 45,503,632 21.0

Public Investment Corporation 12,839,524 5.9

Westwood Global Investments LLC 6,782,752 3.1

group income statement - massmart · current assets 18,687.6 17,870.1 other current financial...

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