WELCOME TO OUR ONLINE ANNUAL REPORT 2011

Notes to the annual financial statements
for the year ended 26 June 2011

31.

Commitments

 
  2011 2010
  Rm Rm
Commitments in respect of capital expenditure approved by directors:    
Contracted for    
Stores to be opened 520.1 148.9
Stores to be refurbished 117.9 27.4
Purchase of new system software 40.3 15.5
Purchase of new hardware 8.5 4.1
Store relocations 12.0 11.6
Minor revamps 11.6 17.7
Purchase of plant and equipment 17.9
Other 9.9 1.7
  738.2 226.9
Not contracted for    
Stores to be opened 225.5 191.1
Stores to be refurbished 57.9 57.9
Purchase of new system software 136.6
Purchase of new hardware 58.1 10.2
Store relocations 115.8 25.9
Minor revamps 43.5 18.0
Store conversions 45.9
Purchase of plant and equipment 15.0
Other 31.4 10.8
  593.1 450.5
  1,331.3 677.4
  • Massmart has the right of first refusal on the sale of any shares by the minority shareholders in various CBW stores. Historically Massmart has exercised this right. The amount to be paid in future, should Massmart exercise its rights, totals R244.2 million (2010: R224.7 million).
  • Capital commitments will be funded using current facilities.

32.

Operating lease commitments

 
  2011 2010
  Rm Rm
Land and buildings    
Year 1 1,082.1 926.8
Years 2 to 5 4,595.3 3,774.1
Subsequent to year 5 4,616.0 3,831.7
  10,293.4 8,532.6
Plant and equipment    
Year 1 5.8 7.3
Years 2 to 5 6.4 9.2
  12.2 16.5
Other    
Year 1 10.8 10.3
Years 2 to 5 17.4 13.3
Subsequent to year 5 0.2 0.8
  28.4 24.4
  10,334.0 8,573.5
  • Promissory notes that represent commitments under non-cancellable operating leases of R485.2 million (2010: R650.0 million) entered into by Masstores (Pty) Limited on behalf of certain Makro stores are included in operating lease commitments in land and buildings. These leases terminate in December 2020 and have a discounted present value of R338.0 million (2010: R485.1 million), discounted at 15% (2010: 15%). In accordance with IAS 17 Leases, the rentals paid are amortised over the entire remaining lease period on a straight-line basis.

33.

Contingent liabilities

 
  2011 2010
  Rm Rm
Contingent liability
  • Other than noted below, there are no current or pending legal or arbitration proceedings, of which the Group is aware, which would have a material effect on the Group's financial position.
  • Following the South African Competition Tribunal’s approval of the Walmart / Massmart merger in June 2011, certain Unions and South African Government departments have filed legal papers to appeal and review, respectively, the Tribunal’s decision. This matter will be heard by the Competition Appeal Court on 20-21 October 2011. Whilst the outcome of this hearing is uncertain, Walmart and Massmart are confident about the strength of our legal position. In the unlikely event of an adverse ruling, whatever that may be, it is unclear what the impact, if any, will be on the Group’s financial position. Shareholders will be kept informed about all material developments in this regard.

34.

Related-party transactions

 
  2011 2010
  Rm Rm
     

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 (defined as the 11-person Massmart Executive Committee) during the year was as follows:    
Short-term benefits (salaries, benefits and short-term incentives) 46.6 38.9
Retirement benefits 2.4 2.1
Other long-term benefits 13.8 16.9
Gains on exercise of share options 297.9 19.0
  360.7 76.9
  • The remuneration of directors and key executives is determined by the Remuneration Committee having regard to the performance of individuals and market trends. There was no change to the composition of the Executive Committee during the two years under review.
  • The gains on exercise of share options in 2011 arises mainly as a result of the Walmart acquisition in June 2011.
Other related-party transactions:
  • From time to time, in the normal course of business, Massmart and its divisions make use of private aircraft hired from competitively selected charter companies, two of which operate aircraft indirectly beneficially owned by the Group's Chairman, Mark Lamberti.
  • The Group holds cash reserves on behalf of the Group's Chairman, Lamberti Education Foundation Trust. Further details relating to these cash reserves can be found in note 28.
  • Loans to directors have been disclosed in note 17.
  • The post-retirement medical aid liability, Massmart Pension Fund and Massmart Provident Fund are managed for the benefit of past and current employees of the Group. Further details can be found in note 25 and note 30, respectively.

35.

Directors’ emoluments

 

The comments below provide further background and context to the figures disclosed in this note, Directors’ emoluments, and Interests of directors in the Company’s Share Scheme (note 36).

GM Pattison

Following a third-party executive remuneration analysis which assessed positions of similar stature and complexity, the Remuneration and Nominations Committee awarded Grant a 23.8% increase to his salary and allowances for the 2011 financial year, from R3.02 million to R3.74 million. In line with the Group’s Short-term Executive Incentive Scheme which rewards executives based on growth in HEPS, he received six months’ salary as a bonus. In addition, the Committee awarded him a qualitative bonus of six months in recognition of his exceptional effort, leadership and effective communication with all aspects of the Walmart transaction. These bonuses totalled R3.67 million.

During the 2011 financial year, but before the commencement of the closed period caused by the Walmart transaction, Grant converted and sold 85,919 Massmart shares and options realising a gain on exercise of share options of R5.5 million. Furthermore, as result of Walmart acquiring 51% of the Massmart vested and unvested share options held by beneficiaries of the Massmart Employee Share Trusts, Grant necessarily had to convert and sell 752,961 shares and options, realising a gain on exercise of share options of R72.4 million.

Through the share scheme, Grant holds 723,418 Massmart shares and options of which 42,202 shares are held in the Pattison Family Trust, of which Grant is a beneficiary. The average length of time that he has held these is 5.4 years and the average strike price is R51.84 per share. The Pattison Family Trust also directly owns 218,055 Massmart shares.

GRC Hayward

Following a third-party executive remuneration analysis which assessed positions of similar stature and complexity, the Remuneration and Nominations Committee awarded Guy a 13.7% increase to his salary and allowances for the 2011 financial year, from R2.42 million to R2.75 million. In line with the Group’s Short-term Executive Incentive Scheme which rewards executives based on growth in HEPS, he received six months’ salary as a bonus. In addition, the Committee awarded a qualitative bonus of three months in recognition of his exceptional effort with regard to the Walmart transaction. These bonuses totalled R2.06 million.

During the 2011 financial year, but before the commencement of the Closed Period caused by the Walmart transaction, Guy converted and sold 175,000 Massmart shares and options realising a gain on exercise of share options of R19.3 million. Furthermore, as a result of Walmart acquiring 51% of the Massmart vested and unvested share options held by beneficiaries of the Massmart Employee Share Trusts, Guy necessarily had to convert and sell 410,747 shares and options, realising a gain on exercise of share options of R36.9 million.

Through the share scheme, Guy holds 394,627 Massmart shares and options of which 19,912 shares are held in the Bluett-Hayward Trust, of which Guy is a beneficiary. The average length of time that he has held these is 4.7 years and the average strike price is R58.20 per share. Guy also owns 36,517 Massmart shares directly.

            Otherwise     Gains on  
            in     exercise  
  Services   Bonuses     connec-   Fringe of share  
  as   and     tion   benefit of options  
  directors   perfor-   Retire- with the   interest- and on  
  of Salary mance-   ment affairs of   free loans shares  
  Massmart and related   and Massmart   used to pur-  
  Holdings allow- pay- Other related Holdings   finance chased  
  Limited ances ments1 benefits benefits Limited Subtotal shares2 by directors Total
  R000 R000 R000 R000 R000 R000 R000 R000 R000 R000
For the year ended June 2011                    
Executive directors                    
Pattison, GM 3,738 3,678 478 386 8,280 3,829 77,947 90,056
Hayward, GRC 2,751 2,064 389 289 5,493 3,073 56,164 64,730
  6,489 5,742 867 675 13,773 6,902 134,111 154,786
Non-executive directors                    
Lamberti, MJ 825 825 825
Seabrooke, CS 745 745 745
Brand, MD* 404 404 404
Davis, JA
Dlamini, KD* 413 413 413
Gwagwa, NN 315 315 315
Hodkinson, JC* 209 209 209
Langeni, P 550 550 550
Matthews, IN* 739 40 779 779
Maw, P* 428 428 428
McMillan, CD
Suarez, JP
Mokhobo, DNM* 306 306 306
Rubin, MJ* 209 209 209
  5,143 40 5,183 5,183
Prescribed Officers                    
Prescribed Officer A 3,235 5 45,185 48,425
Prescribed Officer B 5,229 1,413 22,108 28,750
Prescribed Officer C 5,690 1,533 21,401 28,624
Prescribed Officer D 2,866 1,960 19,086 23,912
Prescribed Officer E 5,828 14,531 20,359
Prescribed Officer F 4,278 822 13,522 18,622
Prescribed Officer G 2,750 229 10,016 12,995
Prescribed Officer H 2,664 334 9,391 12,389
Prescribed Officer I 2,726 591 8,564 11,881
Prescribed Officer J 2,510 5,267 7,777
  37,776 6,887 169,071 213,734
Total 5,143 6,489 5,742 867 675 40 56,732 13,789 303,182 373,703
1 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.
2 Held in terms of the rules of the Company's share scheme.
* Resigned 20 June 2011

                  Gains on  
            Otherwise     exercise  
            in     of share  
  Services   Bonuses     connec-   Fringe options  
  as   and     tion   benefit of and on  
  directors   perfor-   Retire- with the   interest- shares  
  of Salary mance-   ment affairs of   free loans pur-  
  Massmart and related   and Massmart   used to chased  
  Holdings allow- pay- Other related Holdings   finance by  
  Limited ances ments1 benefits benefits Limited Subtotal shares2 directors Total
  R000 R000 R000 R000 R000 R000 R000 R000 R000 R000
For the year ended June 2010                    
Executive directors                    
Pattison, GM 3,019 976 356 308 4,659 4,513 9,172
Hayward, GRC 2,419 806 298 254 3,777 3,733 7,510
  5,438 1,782 654 562 8,436 8,246 16,682
Non-executive directors                    
Lamberti, MJ 793 793 793
Seabrooke, CS 727 727 727
Brand, MD 388 388 388
Combi, ZL3 167 167 167
Dlamini, KD 400 400 400
Gwagwa, NN 294 294 294
Hodkinson, JC 223 223 223
Langeni, P 519 519 519
Matthews, IN 719 40 759 759
Maw, P 437 437 437
Mokhobo, DNM 294 294 294
Rubin, MJ 200 200 200
  5,161 40 5,201 5,201
Prescribed Officers                    
Prescribed Officer A 4 245 2 168 12 972 19 385
Prescribed Officer B 3 950 2 218 668 6 836
Prescribed Officer C 3 950 1 740 950 6 640
Prescribed Officer D 3 492 2 3 136 6 630
Prescribed Officer E 4,966 2 1,360 6,329
Prescribed Officer F 5 457 5 457
Prescribed Officer G 4 234 286 4 520
Prescribed Officer H 3 236 1 240 4 476
Prescribed Officer I 1 871 559 1 263 3 693
Prescribed Officer J 2 097 437 2 534
  37,498 8,652 20,349 66,500
Total 5,161 5,438 1,782 654 562 40 51,135 16,898 20,349 88,383
1 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.
2 Held in terms of the rules of the Company's share scheme.
* Resigned 20 June 2010

36.

Interests of directors in the Company's share scheme

 


Details of directors' shares and share options per director:

    Number of Gain on  
Sub- Market shares/ sale/  
scription price share exercise  
  Relevant date price (R) (R) options (R000) Expiry date
Pattison, GM            
Balance at the beginning of the previous
year
      1,562,298    
No shares were traded, exercised or granted in the prior period.          
Balance at the beginning of the year       1,562,298    
Shares traded 26 May 2004 29.87 121.93 (35,919)    
Shares traded 23 May 2006 54.13 148.00 (382,500) 35,904  
Shares traded 24 May 2007 94.25 148.00 (28,052) 1,508  
Shares traded 26 May 2008 72.86 148.00 (43,480) 3,264  
Shares traded 27 May 2009 77.56 148.00 (43,929) 3,092  
Options exercised 27 August 2001 10.95 121.93 (50,000) 5,549  
Options exercised 27 August 2001 10.95 148.00 (51,000) 6,990  
Options exercised 1 April 2005 41.91 148.00 (204,000) 21,640  
New shares/options granted          
Balance at the end of the year       723,418 77,947  
Comprising: 27 August 2001 10.95   49,000   26 August 2011
  1 April 2005 41.91   196,000   31 March 2015
  23 May 2006 54.13   367,500   22 May 2016
  24 May 2007 94.25   26,948   23 May 2017
  26 May 2008 72.86   41,768   25 May 2018
  27 May 2009 77.56   42,202   26 May 2019
Hayward, GRC            
Balance at the beginning of the previous
year
      1,032,898    
No shares were traded, exercised or granted in the current period.          
Balance at the beginning of the year       1,032,898    
Shares traded 10 March 2000 14.61   (8,643)    
Shares traded 26 May 2004 29.87   (43,881)    
Shares traded 1 April 2005 41.91 148.00 (102,000) 10,820  
Shares traded 23 May 2006 54.13 148.00 (76,500) 7,180  
Shares traded 24 May 2007 94.25 148.00 (25,445) 1,362  
Shares traded 1 April 2008 66.91 148.00 (20,729) 1,680  
Shares traded 26 May 2008 72.86 148.00 (38,070) 2,860  
Shares traded 27 May 2009 77.56 148.00 (109,753) 7,728  
Options exercised 13 November 2000 12.25 121.93 (100,000) 10,968  
Options exercised 27 August 2001 10.95 121.93 (75,000) 8,324  
Options exercised 27 August 2001 10.95 148.00 (38,250) 5,242  
New shares/options granted          
Balance at the end of the year       394,627 56,164  
Comprising: 27 August 2001 10.95   36,750   26 August 2011
  1 April 2005 41.91   98,000   31 March 2015
  23 May 2006 54.13   73,500   22 May 2016
  24 May 2007 94.25   24,444   23 May 2017
  1 April 2008 66.91   19,912   1 April 2018
  26 May 2008 72.86   36,573   25 May 2018
  27 May 2009 77.56   105,448   26 May 2019

37.

Principal subsidiaries

 

Details of Massmart's material subsidiary companies are as follows:

  Number         Shares at  
  of shares Place of   Voting   book Indebt-
  in issue incorporation Ownership power   value edness
Name of company (000) and operation (%) (%) Principal activity (Rm) (Rm)
2011              
De La Rey 1001 Building         Selling of building    
Materials (Pty) Limited South Africa 100 100 materials 28.4 154.6
          Wholesale and retail    
Massbuild (Pty) Limited South Africa 100 100 of DIY products 992.3
Jumbo Cash & Carry         Wholesale cash and    
(Pty) Limited South Africa 100 100 carry 74.5
Masscash Holdings              
(Pty) Limited South Africa 100 100 Holding company 1.0
Massmart International              
Holdings Limited Mauritius 100 100 Holding company 81.5
Massmart Management &         Management,    
Finance Company         investment and    
(Pty) Limited South Africa 100 100 finance 34.0
          Retailing,    
          warehousing, mass    
Masstores (Pty) Limited 200 South Africa 100 100 merchandising (478.0)
            103.9 784.4
2010              
De La Rey 1001 Building         Selling of building    
Materials (Pty) Limited South Africa 100 100 materials 28.4 154.6
Builders Trade Depot         Wholesale and retail    
(Pty) Limited South Africa 100 100 of DIY products 54.9
Jumbo Cash & Carry         Wholesale cash and    
(Pty) Limited South Africa 100 100 carry 74.5
Masscash Holdings              
(Pty) Limited South Africa 100 100 Holding company 1.0
Massmart International              
Holdings Limited Mauritius 100 100 Holding company 81.5
Massmart Management &         Management,    
Finance Company         investment and    
(Pty) Limited South Africa 100 100 finance (60.1)
          Retailing,    
          warehousing, mass    
Masstores (Pty) Limited 200 South Africa 100 100 merchandising (478.0)
Servistar (Pty) Limited South Africa 100 100 DIY retailer 112.7
            103.9 (134.4)
  • 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.

38.

Notes to the cash flow statement

 
    2011 2010
    Rm Rm
38.1
Cash flow from trading
   
  Profit before taxation 1,504.1 1,820.0
  Adjusted for:    
  Depreciation, amortisation and impairment 486.3 386.5
  Net loss on disposal of property, plant and equipment 4.0 3.6
  Interest income (33.2) (45.9)
  Interest expense 140.4 92.6
  Investment income (46.8) (33.8)
  Dividend income (2.1) (2.3)
  Share-based payment expense 110.7 149.4
  Unrealised foreign exchange loss 3.9 18.0
  Supplier Development Fund 100.0
  Other non-cash movements (2.5) (41.3)
    2,264.8 2,346.8
38.2
Working capital movements
   
  Increase in inventories (589.3) (629.9)
  Increase in trade receivables and prepayments (241.9) (394.8)
  Increase in trade payables 207.2 1,319.0
  Decrease in provisions (1.4) (1.7)
    (625.4) 292.6
38.3

Taxation paid

   
  Normal taxation:    
  Amounts owing at the beginning of the year (179.8) (161.1)
  Amounts owing at the end of the year 148.1 179.8
  Receiver of Revenue balance acquired on current year acquisitions (1.7) 2.8
  Taxation charged to the income statement (excluding deferred taxation) (611.7) (574.3)
    (645.1) (552.8)
38.4
Investment to maintain operations
   
  Land and buildings/leasehold improvements (25.6) (9.7)
  Vehicles (27.4) (22.8)
  Fixtures, fittings, plant and equipment (152.5) (125.5)
  Computer hardware (44.0) (33.6)
  Computer software (95.9) (92.4)
    (345.4) (284.0)
38.5
Investment to expand operations
   
  Land and buildings/leasehold improvements (310.4) (40.8)
  Vehicles (21.4) (14.6)
  Fixtures, fittings, plant and equipment (415.1) (239.9)
  Computer hardware (46.0) (33.3)
  Computer software (12.5) (17.5)
  Goodwill (37.6)
    (843.0) (346.1)
38.6
Proceeds on disposal of property, plant and equipment
   
  Vehicles 20.5 3.9
  Fixtures, fittings, plant and equipment 4.4 1.7
  Computer software and equipment 0.3 0.6
    25.2 6.2
38.7
Proceeds on disposal of assets classified as held for sale
15.0
 
  • Proceeds on disposal of 11 Saverite stores
   
38.8

Investment in subsidiaries

   
  Fair value of assets and liabilities acquired in subsidiaries:    
  Cash and cash equivalents 0.7 (9.4)
  Inventories (23.6) (78.3)
  Trade and other receivables and prepayments (0.5) (73.7)
  Tangible assets (82.2) (205.8)
  Intangible assets (1.2)
  Loans and investments (25.2)
  Taxation 1.7 (2.8)
  Trade payables 16.8 176.5
  Provisions 3.1 32.8
  Long-term debt 20.1 15.2
  Deferred taxation 3.1 13.3
  Goodwill (185.0) (305.8)
  Minorities 75.5 87.1
  Other (2.0)
  Total purchase price (170.3) (379.3)
  Less: Cash and cash equivalents of subsidiary (0.7) 9.4
  Cash impact of acquisition, net of cash and cash equivalents acquired (171.0) (369.9)
38.9
Disposal of subsidiary
   
  Net assets at date of disposal:    
  Trade and other receivables and prepayments 6.9
  Goodwill 16.0
  Total net assets at date of disposal 22.9
  Gain on disposal 4.0
  Cash and cash equivalents received on sale 26.9
 
  • The disposal of subsidiary in the prior year relates to the sale of the cell phone contract business in CellShack (Masscash).
   
38.10
Other investing activities including minority interests acquired
   
  Off-shore investment (26.4) (26.9)
  Cost of acquiring minority interests (48.3) (212.8)
  Treasury shares 91.1
  Other 96.0 (15.2)
    21.3 (163.8)
38.11
Cash and cash equivalents at the end of the year
   
  Cash on hand and balances with banks 1,549.1 1,368.3
  Bank overdrafts (804.7) (57.4)
  Cash and cash equivalents at the end of the year 744.4 1,310.9

39.

Financial instruments

 
39.1
Capital risk management
 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances.

The capital structure of the Group consists of debt, more specifically medium-term interest-bearing debt and equity attributable to equity holders of the parent, comprising share capital, share premium, other reserves and retained profit. (See notes 21 and 22).

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 Group has medium-term debt facilities that include certain covenants, including:
  • maximum gearing ratio
  • minimum interest cover
  • specified levels of shareholders' equity

At year-end, of the Group's general banking facility of R3,011.9 million (2010: R1,911.9 million), only R778.4 million (2010: R57.4 million) had been utilised and thus R2,233.5 million (2010: R1,854.6 million) was still available.

39.2
Significant accounting policies
 

Details of significant accounting policies, including the recognition criteria, the basis for measurement and the basis on which income and expenses are recognised, in respect of each category of financial asset, financial liability and equity instrument, are disclosed under the notes in accounting policies (in note 1).

39.3
Categories of financial instruments
 
Fair values of financial instruments

All financial instruments have been classified according to the relevant IAS 39 Financial Instruments: Recognition and Measurement category. There is no difference between their fair value and carrying value and they are accounted for as follows:

Financial assets

Fair value through profit or loss (FVTPL)
These are held at fair value and any adjustments to fair value are taken to the income statement. Listed investments are carried at market value by reference to stock exchange quoted selling prices.

Loans and receivables
These are held at amortised cost less any impairment losses recognised to reflect irrecoverable amounts.

Held-to-maturity investment
These are held at amortised cost less any impairment losses recognised to reflect irrecoverable amounts.

Available-for-sale investments
These are held at fair value and any adjustment to fair value is taken comparative income.

Financial liabilities
All financial liabilities are held as non-trading liabilities and are shown at amortised cost.

The cash flows expected from the Group's participation in export partnerships over the next two to five years cannot, in the opinion of the directors, be accurately fair valued and therefore have not been discounted. For fair presentation purposes, it is noted that any fair value impairment in the amounts due to the Group by virtue of its participation in such partnerships would result in a corresponding reduction in the fair value of the related deferred tax liability. Consequently, such fair value impairment would have no impact on either the statement of cash flows or income statement of the Group.

              Available-  
              for-  
        Liability at   Held-to- sale Non-
    Financial   amortised Loans and maturity financial financial
  Total instrument FVTPL cost receivables investments assets instrument
  Rm Rm Rm Rm Rm Rm Rm Rm
2011                

Assets

               
Non-current assets                
Property, plant and equipment 2,717.8 2,717.8
Goodwill 2,049.4 2,049.4
Other intangibles 309.0 309.0
Investments 367.6 367.6 360.0 3.6 0.1 3.9
Investment in associate
Bare dominium revaluation 70.6 70.6 70.6
Investment in offshore trading structure 250.0 250.0 250.0
Participation in insurance cell-captive on extended warranties 5.8 5.8 5.8
Participation in insurance cell-captive on premium contributions 25.7 25.7 25.7
Trencor export partnership 3.6 3.6 - 3.6
Other unlisted investments 8.0 8.0 7.9 0.1
Other listed investments 3.9 3.9 3.9
Other financial assets 137.9 137.9 137.9
Housing and staff loans 0.7 0.7 0.7
Employee share trust loans 91.8 91.8 91.8
Finance lease deposit 45.3 45.3 45.3
Other loans 0.1 0.1 0.1
Deferred taxation 265.0 265.0
Current assets                
Inventories 6,199.7 6,199.7
Trade, other receivables and prepayments 2,562.7 2,515.2 2,515.2 47.5
Trade and other receivables 2,515.2 2,515.2 2,515.2 -
Prepayments 47.5 47.5
Taxation 22.5 22.5
Cash and bank balances 1,549.1 1,549.1 1,549.1
Restricted cash held on behalf of Massmart Employee Share Trusts’ beneficiaries* 1,093.6 1,093.6 1,093.6
Total assets 17,274.3 5,663.4 360.0 5,299.4 0.1 3.9 11,610.9

Liabilities

               
Non-current liabilities                
Non-current liabilities – interest-bearing 598.7 598.7 598.7
Medium-term bank loans 540.2 540.2 540.2
Capitalised finance lease 58.5 58.5 58.5
Non-current liabilities – interest-free 417.3 3.0 3.0 414.3
Minority shareholders' loans 3.0 3.0 3.0
Operating lease liability 414.3 414.3
Non-current provisions 167.0 167.0
Deferred taxation 22.2 22.2
Current liabilities                
Trade and other payables 9,381.8 9,382.1 3.7 9,378.4 (0.3)
Trade payables 7,553.9 7,553.9 7,553.9
Operating lease liability (21.8) (21.8)
Income received in advance 21.5 21.5
Sundry payables and other accruals 1,828.2 1,828.2 3.7 1,824.5
Massmart Employee Share                
Trusts' beneficiaries liability* 1,093.6 1,093.6 1,093.6
Provisions 26.8 26.8
Taxation 170.6 170.6
Other current liabilities 409.9 409.9 409.9
Medium-term payable 92.7 92.7 92.7
Medium-term bank loans 294.9 294.9 294.9
Capitalised finance lease 22.3 22.3 22.3
Bank overdrafts 804.7 804.7 804.7
Total liabilities 13,092.6 12,292.0 3.7 12,288.3 800.6
  • *  These amounts represent the net cash proceeds held in the three Massmart Employee Share Trusts, and the corresponding
        liability to the beneficiaries, as a result of the Walmart Transaction. The cash was distributed to beneficiaries shortly after
       26 June 2011. The Massmart Employee Share Trusts are consolidated with the Group results. In the Statement of Cash Flows,
        the two amounts have been contra’d in the Cash inflow from Financing Activities.

              Available-  
              for-  
        Liability at   Held-to- sale Non-
    Financial   amortised Loans and maturity financial financial
  Total instrument FVTPL cost receivables investments assets instrument
  Rm Rm Rm Rm Rm Rm Rm Rm
2010                

Assets

               
Non-current assets                
Property, plant and equipment 2,055.2 2,055.2
Goodwill 1,875.0 1,875.0
Other intangibles 220.8 220.8
Investments 315.3 313.6 307.7 4.9 0.7 0.3 1.7
Investment in associate 2.8 1.1 1.1 1.7
Bare dominium revaluation 60.8 60.8 60.8
Investment in offshore trading structure 223.6 223.6 223.6
Participation in insurance cell-captive on extended warranties 1.8 1.8 1.8
Participation in insurance cell-captive on premium contributions 21.5 21.5 21.5
Trencor export partnership 3.8 3.8 3.8
Other unlisted investments 0.7 0.7 0.7
Other listed investments 0.3 0.3 0.3
Other financial assets 270.3 270.3 270.3
Housing and staff loans 0.5 0.5 0.5
Employee share trust loans 216.1 216.1 216.1
Finance lease deposit 51.1 51.1 51.1
Other loans 2.6 2.6 2.6
Deferred taxation 238.3 238.3
Current assets                
Inventories 5,601.5 5,601.5
Trade, other receivables and prepayments 2,322.6 2,276.8 2,276.8 45.8
Trade and other receivables 2,276.8 2,276.8 2,276.8
Prepayments 45.8 45.8
Taxation 22.1 22.1
Cash and bank balances 1,368.3 1,368.3 1,368.3
Restricted cash held on behalf of Massmart Employee Share Trust’ beneficiaries
Total assets 14,289.4 4,229.0 307.7 3,920.3 0.7 0.3 10,060.4

Liabilities

               
Non-current liabilities                
Non-current liabilities – interest-bearing 385.8 385.8 385.8
Medium-term bank loans 309.1 309.1 309.1
Capitalised finance lease 76.7 76.7 76.7
Non-current liabilities – interest-free 423.5 0.7 0.7 422.8
Minority shareholders' loans 0.7 0.7 0.7
Operating lease liability 422.8 422.8
Non-current provisions 66.6 66.6
Deferred taxation 19.4 19.4
Current liabilities                
Trade and other payables 9,194.3 9,174.0 0.6 9,173.4 20.3
Trade payables 7,329.0 7,329.0 7,329.0
Operating lease liability (6.0) (6.0)
Income received in advance 26.3 26.3
Sundry payables and other accruals 1,845.0 1,845.0 0.6 1,844.4
Provisions 25.8 25.8
Taxation 201.9 201.9
Other current liabilities 322.9 322.9 322.9
Medium-term payable 80.0 80.0 80.0
Medium-term bank loans 217.9 217.9 217.9
Capitalised finance lease 25.0 25.0 25.0
Bank overdrafts 57.4 57.4 57.4
Total liabilities 10,697.6 9,940.8 0.6 9,940.2 756.8

39.4
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, currency risk and other price risk)
  • liquidity risk
  • 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 currency risk, interest rate risk, and other price 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 executive management is part of this process. The processes set up to measure, monitor and mitigate these market risks are described below. 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 period.

Interest rate management

During the year, the position of the Group alternated between having surplus cash and being in a borrowed position. The size of the Group's position, be it either surplus cash or borrowings, exposes it to interest rate risk. The interest-bearing debt funding requirements and the investment of surplus cash funds are managed by Massmart through its own commercial bank facilities.

The carrying amount of the Group's financial assets and liabilities at balance sheet date that are subject to interest rate risk is as follows:

  Subject to interest      
  rate movement   Non-interest-bearing
  Fixed Floating     Total
  Rm Rm   Rm Rm
2011          
Financial assets          
Investments          
Investment in associate  
Bare dominium revaluation   70.6 70.6
Investment in offshore trading structure   250.0 250.0
Participation in insurance cell-captive onextended warranties   5.8 5.8
Participation in insurance cell-captive on premium contributions   25.7 25.7
Trencor export partnership 3.6   3.6
Other unlisted investments   8.0 8.0
Other listed investments   3.9 3.9
Other financial assets          
Housing and staff loans 0.7   0.7
Employee share trust loans   91.8 91.8
Finance lease deposit 45.3   45.3
Other loans   0.1 0.1
Trade, other receivables and prepayments          
Trade and other receivables   2,515.2 2,515.2
Cash and bank balances 1,549.1   1,549.1
Restricted cash held on behalf of Massmart Employee Share Trusts' beneficiaries 1,093.6   1,093.6
Total financial assets 46.0 2,646.3   2,971.1 5,663.4
Financial liabilities          
Non-current liabilities – interest-bearing          
Medium-term bank loans 540.2   540.2
Capitalised finance lease 58.5   58.5
Non-current liabilities – interest-free          
Minority shareholders' loans   3.0 3.0
Trade and other payables          
Trade payables   7,553.9 7,553.9
Sundry payables and other accruals   1,828.2 1,828.2
'Massmart Employee Share Trusts' beneficiaries liability       1,093.6 1,093.6
Other current liabilities          
Medium-term payable 92.7   92.7
Medium-term bank loans 294.9   294.9
Capitalised finance lease 22.3   22.3
Bank overdrafts 804.7   804.7
Total financial liabilities 1,008.6 804.7   10,478.7 12,292.0
2010          
Financial assets          
Investments          
Investment in associate   1.1 1.1
Bare dominium revaluation   60.8 60.8
Investment in offshore trading structure   223.6 223.6
Participation in insurance cell-captive on extended warranties   1.8 1.8
Participation in insurance cell-captive on premium contributions   21.5 21.5
Trencor export partnership 3.8   3.8
Other unlisted investments   0.7 0.7
Other listed investments   0.3 0.3
Other financial assets          
Housing and staff loans 0.5   0.5
Employee share trust loans   216.1 216.1
Finance lease deposit 51.1   51.1
Other loans   2.6 2.6
Trade, other receivables and prepayments          
Trade and other receivables   2,276.8 2,276.8
Cash and bank balances 1,368.3   1,368.3
Total financial assets 51.6 1,372.1   2,805.3 4,229.0
Financial liabilities          
Non-current liabilities – interest-bearing          
Medium-term bank loans 309.1   309.1
Capitalised finance lease 76.7   76.7
Non-current liabilities – interest-free          
Minority shareholders' loans   0.7 0.7
Trade and other payables          
Trade payables   7,329.0 7,329.0
Sundry payables and other accruals   1,845.0 1,845.0
Other current liabilities          
Medium-term payable 80.0   80.0
Medium-term bank loans 217.9   217.9
Capitalised finance lease 25.0   25.0
Bank overdrafts 57.4   57.4
Total financial liabilities 708.7 57.4   9,174.7 9,940.8

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 7.2% (2010: 8.0%), and the variable interest paid was R59.4 million (2010: R24.8 million). If the SA Prime interest rate increased and decreased by 50 average basis points (2010: increased and decreased by 50 average basis points) at year-end, the income for the year would have decreased and increased by R4.1 million respectively (2010: decreased and increased by R1.6 million respectively).

Currency risk management

All foreign-denominated trading liabilities are covered by forward exchange contracts. Foreign-denominated assets are not covered by forward exchange contracts.

The carrying amount of the Group's foreign currency denominated monetary assets at balance sheet date is as follows:

  South African        
  Rand US Dollar Euro Other Total
  Rm Rm Rm Rm Rm
2011          
Investments 117.6 250.0 367.6
Trade receivables 2,409.6 0.4 105.2 2,515.2
Cash and bank balances 1,414.3 104.4 10.2 309.1 1,838.0
  3,941.5 354.8 10.2 414.3 4,720.8
2010          
Investments 90.0 223.6 313.6
Trade receivables 2,164.6 3.9 108.3 2,276.8
Cash and bank balances 1,066.0 (9.6) 24.5 230.0 1,310.9
  3,320.6 217.9 24.5 338.3 3,901.3

Foreign currency sensitivity

The US Dollar is the primary currency to which the Group is exposed.

In the past, the US Dollar movement against the Rand has been a good proxy for the Group's exposure to the basket of African currencies. During the 2009 financial year, this relationship broke as the African currencies weakened considerably and can be seen in the graph below. In the 2010 and the 2011 financial years, the relationship was restored.

This graph shows the annual change of closing spot rates at each financial year-end.

As a result of the recent African currency volatility, we have extended the sensitivity calculation for the Group's three larger African currencies, namely the Malawian Kwacha, the Nigerian Naira and the Zambian Kwacha. The year-end spot rates were:

  Spot rate Spot rate
Currency June 2011 June 2010
US Dollar 6.9508 7.6740
Malawian Kwacha 0.0469 0.0524
Nigerian Naira 0.0449 0.0518
Zambian Kwacha 0.0015 0.0015

The table below indicates the Group's sensitivity at year-end to movements in the relevant foreign currencies on financial instruments, 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.

  Rm Rm
  5% increase 5% decrease
2011    
US Dollar    
Profit/(loss) 3,8 (3,8)
Financial assets/(liabilities) (3,8) 3,8
Malawian Kwacha    
Profit/(loss) 0,5 (0,5)
Financial assets/(liabilities) (0,5) 0,5
Nigerian Naira    
Profit/(loss) 0,5 (0,5)
Financial assets/(liabilities) (0,5) 0,5
Zambian Kwacha    
Profit/(loss) 0,0 0,0
Financial assets/(liabilities) 0,0 0,0
2010    
US Dollar    
Profit/(loss) 6,7 (6,7)
Financial assets/(liabilities) (6,7) 6,7
Malawian Kwacha    
Profit/(loss) 1,7 (1,7)
Financial assets/(liabilities) (1,7) 1,7
Nigerian Naira    
Profit/(loss) 0,3 (0,3)
Financial assets/(liabilities) (0,3) 0,3
Zambian Kwacha    
Profit/(loss) 0,2 (0,2)
Financial assets/(liabilities) (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.

Forward foreign exchange contracts have been accounted for according to IAS 39 Financial Instruments: Recognition and Measurement. Fair value has been determined using money market derivative rates at 26 June 2011 and the net gain or exposure on the contracts has been reflected in the financial statements.

At year-end, the open forward exchange contracts were as follows:

  Foreign Fair value Contract  
  currency adjustment equivalent Average
  (millions) (Rm) (Rm) exchange rate
2011        
US Dollar 62,8 (3,6) 442,5 7,0
Sterling 0,2   11,5
Euro 0,1 1,3 10,0
    (3,6) 446,3  
         
US Dollar 88,9 (0,6) 696,6 7,8
Sterling 0,1 1,7 11,4
Euro 0,2 1,6 9,9
    (0,6) 699,9  

Forward foreign exchange contracts sensitivity

The following table indicates the Group's sensitivity of the outstanding forward exchange contracts at the balance sheet date to movements in the US Dollar. The US Dollar 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/US Dollar year-end rate was R6.95 (2010: R7.67).

  US Dollar  
  Rm Rm
  5% increase 5% decrease
2011    
Profit/(loss) 18,3 (25,6)
Derivative financial assets/(liabilities) 21,9 (21,9)
Equity 0,9 (0,9)
2010    
Profit/(loss) 33,1 (36,5)
Derivative financial assets/(liabilities) 34,8 (34,8)
Equity 1,7 1,7

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 non-derivative 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 interest payments.

  Repayable Repayable Repayable  
  within 1 year 2 – 5 years after 5 years Total
  Rm Rm Rm Rm
2011        
Financial liabilities        
Non-current and current liabilities – interest-bearing        
Medium-term payable 92.7 92.7
Medium-term bank loans 361.6 575.3 936.9
Capitalised finance lease 29.5 67.3 96.8
Non-current liabilities – interest-free        
Minority shareholders' loans 3.0 3.0
Trade and other payables        
Trade payables 7,553.9 7,553.9
Sundry payables and other accruals 1,828.2 1,828.2
Massmart Employee Share Trusts beneficiaries liability 1,093.6 1,093.6
Bank overdrafts 804.7 804.7
Total undiscounted cash flows of the Group's financial liabilities 11,764.2 642.6 3.0 12,409.8
Less: Future finance charges       (117.8)
Total financial liabilities       12,292.0
2010        
Financial liabilities        
Non-current and current liabilities – interest-bearing        
Medium-term payable 80.0 80.0
Medium-term bank loans 260.6 340.3 600.9
Capitalised finance lease 34.2 91.8 126.0
Non-current liabilities – interest-free        
Minority shareholders' loans 0.7 0.7
Trade and other payables        
Trade payables 7,329.0 7,329.0
Sundry payables and other accruals 1,845.0 1,845.0
Bank overdrafts 57.4 57.4
Total undiscounted cash flows of the Group's financial liabilities 9,606.2 432.1 0.7 10,039.0
Less: Future finance charges       (98.2)
Total financial liabilities       9,940.8

Credit risk management

Potential areas of credit risk include trade and consumer accounts receivable and short-term 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 bad debts, 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 bad debt provisions. Further details relating to trade and other receivables can be found in note 20.

The carrying amount of the financial assets represents the Group's maximum exposure to credit risk without taking into consideration any collateral provided:

  Maximum credit risk
  2011 2010
  Rm Rm
Investments    
Trencor export partnership 3.6 3.8
Trade, other receivables and prepayments    
Trade and other receivables 2,515.2 2,276.8
Cash and bank balances 2,642.7 1,368.3
  5,161.5 3,648.9
   

40.

Segmental reporting

 
Primary business segments

The Group is organised into four divisions for operational and management purposes, being Massdiscounters, Masswarehouse, Massbuild and Masscash. Massmart reports its primary business segment information on this basis. The principal offering for each division is as follows: Massdiscounters – general merchandise discounter Masswarehouse – warehouse club Massbuild – home improvement retailer and building materials supplier Masscash – food wholesaler, retailer and buying association

      Mass- Mass-    
  Total Corporate discounters warehouse Massbuild Masscash
  Rm Rm Rm Rm Rm Rm
2011            
Sales 52,950.1 13,332.5 12,722.9 7,271.0 19,623.7
Operating profit before interest and taxation 1,611.3 (543.3) 711.7 726.3 328.9 387.7
Trading profit before interest and taxation * 2,182.9 744.0 749.0 315.1 374.8
Net finance (costs)/income (107.2) (255.9) 38.0 54.2 39.6 16.9
Operating profit/(loss) before taxation 1,504.1 (799.2) 749.7 780.5 368.5 404.6
Trading profit before taxation * 2,331.6 782.0 803.2 354.7 391.7
Inventory 6,199.7 1.0 2,283.8 1,239.2 1,062.1 1,613.6
Total assets 17,274.3 (911.3) 5,212.5 3,952.6 3,708.5 5,312.0
Total liabilities 13,092.6 (4,090.2) 5,123.9 4,163.4 3,541.6 4,353.9
Net capital expenditure ** 1,148.2 238.7 336.3 188.4 140.8 244.0
Depreciation and amortisation 476.3 14.8 169.2 87.4 108.5 96.4
Impairment losses 10.0 10.0
Non-cash items other than depreciation and impairment 274.4 213.4 33.7 (32.4) 65.5 (5.8)
Cash flow from operating activities 113.5 (41.1) 81.6 (7.3) (13.0) 93.3
Cash flow from investing activities (1,297.9) (225.1) (336.4) (167.5) (169.5) (399.4)
Cash flow from financing activities 615.3 (119.1) 223.4 27.3 350.5 133.2

 

      Mass- Mass-    
  Total Corporate discounters warehouse Massbuild Masscash
  Rm Rm Rm Rm Rm Rm
2010            
Sales 47,451.0 12,164.9 11,501.2 6,366.9 17,418.0
Operating profit before interest and taxation 1,866.7 (69.7) 539.3 680.7 244.5 471.9
Trading profit before interest and taxation * 2,027.8 612.8 685.4 260.5 469.1
Net finance (costs)/income (46.7) (209.8) 47.6 57.8 31.2 26.5
Operating profit/(loss) before taxation 1,820.0 (279.5) 586.9 738.5 275.7 498.4
Trading profit before taxation * 2,190.9 660.4 743.2 291.7 495.6
Inventory 5,601.5 7.8 2,134.7 1,161.0 943.6 1,354.4
Total assets 14,289.4 (2,364.2) 4,827.5 3,779.0 3,174.5 4,872.6
Total liabilities 10,697.6 (5,000.4) 4,784.1 4,011.1 2,818.5 4,084.3
Net capital expenditure ** 623.9 22.7 285.1 77.3 143.2 95.6
Depreciation and amortisation 382.8 8.7 134.0 79.8 93.5 66.8
Impairment losses 3.7 1.5 0.7 1.5
Non-cash items other than depreciation and impairment 140.3 117.3 18.1 (28.8) 55.7 (22.0)
Cash flow from operating activities 1,253.6 397.2 290.6 246.3 165.4 154.1
Cash flow from investing activities (1,130.7) 56.8 (285.0) (72.4) (387.5) (442.6)
Cash flow from financing activities 193.8 (575.2) 146.6 18.4 315.0 289.0

 

  • The corporate column includes certain consolidation entries.
  • All inter-company transactions have been eliminated in the above results.
  • Additional information can be found in the Operational review.

*   Trading profit before taxation is earnings before corporate net interest, asset impairments, BEE transaction IFRS 2 charges,
    foreign exchange movements and Transaction costs.
**Net capital expenditure is defined as capital expenditure less disposal proceeds.

Secondary geographic segments

The Group's four divisions operate in two principal geographical areas – South Africa and the Rest of Africa.

  Total South Africa Rest of Africa Total South Africa Rest of Africa
  2011 2011 2011 2010 2010 2010
  Rm Rm Rm Rm Rm Rm
Sales 52,950.1 49,044.1 3,906.0 47,451.0 43,843.4 3,607.6
Segment assets 17,274.3 16,492.4 781.9 14,289.4 13,442.7 846.7
Net capital expenditure 1,148.2 1,086.6 61.6 623.9 601.4 22.5

All inter-company transactions have been eliminated in the above results.

41.

Value added statement

 
  2011   2010  
  June   June  
  Rm % Rm %
Sales, royalties, franchise fees, rentals and management and administration fees (inclusive of VAT) 60,457.4   51,990.8  
Cost of sales (43,281.8)   (38,879.3)  
Interest and investment income 89.9   88.8  
Net costs of services and other operating expenses (3,953.8)   (3,069.7)  
Value added 13,311.7   10,130.6  
Applied as follows:        
To employees as salaries, wages and other benefits 3,766.3 28.3 3,352.9 33.1
To Government as taxation 8,009.9 60.2 5,090.6 50.2
To shareholders as dividends 822.5 6.2 822.4 8.1
To lenders as interest 140.4 1.1 92.6 0.9
Depreciation and amortisation 476.3 3.6 382.8 3.8
Minorities 41.7 0.3 35.4 0.3
Net earnings retained 54.6 0.3 353.9 3.5
Total 13,311.7 100.0 10,130.6 100.0


42.

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 in note 1, management has not made any critical judgements that have a significant effect on the amounts recognised in the financial statements apart from those involving estimations.

Key sources of estimation uncertainty
  • Property, plant and equipment
    Property, plant and equipment is depreciated over its useful life 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 values, the remaining life of the asset, its projected disposal value and future market conditions are taken onto account. For more detail on property, plant and equipment, see note 13.

  • Goodwill impairment
    Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units 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 cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the reporting date was R2,049.4 million (2010: R1,875.0 million). The impairment of goodwill in the current year relates to the impairment of certain acquired goodwill in Masscash. A small impairment loss of R0.7 million was recognised in the prior year. Details of the impairment loss calculation are provided in note 14.

  • Inventory provisions
    Inventory provisions include shrinkage, obsolescence and write-downs which take into account historical information related to sales trends and stock counts and represent the expected write-down between the estimated net realisable value and the original cost. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. For more detail on the provisions, see note 19.

  • Allowance for doubtful debts
    The Group assesses it 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. For more detail on the allowance, see note 20.

  • Fair value of options granted
    The fair value of options granted in terms of IFRS 2 Share-based Payment is obtained using option pricing models. Assumptions include: expected volatility, expected life, risk-free rate and expected dividend yield. By obtaining an external valuation by accredited valuators, management is of the opinion that the risk relating to estimation uncertainty has been mitigated. For more detail on the valuations, see note 22.

  • Provision for post-retirement medical aid
    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 by accredited valuators, management is of the opinion that the risk relating to estimation uncertainty has been mitigated. Details can be found in note 25.

4.3

Events after the balance sheet date

 

There are no material post balance sheet events. Two conditional acquisitions, Fruitspot and Rhino Cash & Carry, have been filed with the Competition Commission whose findings are expected to be issued in October 2011.

44.

Shareholder analysis

 

The following analysis of shareholders was extracted from the shareholders register as at June 2011:

      Number of  
  Number % shares %
Shareholder spread        
1 – 1,000 shares 5,046 82.6 1,167,631 0.5
1,001 – 10,000 shares 796 13.0 2,329,288 1.1
10,001 – 100,000 shares 184 3.0 5,714,720 2.7
100,001 – 1,000,000 shares 64 1.1 17,939,439 8.4
1,000,001 shares and over 19 0.3 186,732,382 87.3
  6,109 100.0 213,883,460 100.0
Distribution of shareholders        
Walmart subsidiary:        
   Main Street 830 (Pty) Ltd 1 0.0 113,859,293 53.2
Unit Trusts/Mutual Fund 119 2.0 40,911,959 19.1
Pension Funds 86 1.4 28,731,090 13.4
Other Managed Funds 39 0.6 9,341,004 4.4
Foreign Government 20 0.3 8,254,903 3.9
Private Investors 19 0.3 4,842,377 2.3
Custodians 21 0.3 3,977,513 1.9
Insurance Companies 6 0.1 1,472,299 0.7
Charity 2 714,605 0.3
American Depository Receipts 5 0.1 619,247 0.3
Investment Trust 3 0.1 280,788 0.1
Local Authority
Hedge Fund
Remainder 5,788 94.8 878,382 0.4
  6,109 100.0 213,883,460 100.0
Public/non-public shareholders        
Non-public shareholders:        
Walmart subsidiary:        
   Main Street 830 (Pty) Ltd 1 113,859,293 53.2
Directors and Group Executives of the        
Company 5 0.1 1,355,467 0.6
Share trust 2 110,094 0.1
Public shareholders 6,101 99.9 98,558,606 46.1
  6,109 100.0 213,883,460 100.0
Custodians and managers holding 3% or more        
The following custodians and managers held beneficially, directly or indirectly, 3% or more of the Company's shares:        
Aberdeen Asset Management Group     28,724,111 13.4
Public Investment Corporation     14,002,745 6.6
JP Morgan Asset Management     9,264,807 4.3
Baillie Gifford & Co Ltd     7,558,621 3.5
Lazard Asset Management LLC Group     6,546,905 3.1

Further details of the directors' shareholdings can be found in the Directors' report.