Directors' report

Directors' responsibilities

The directors acknowledge responsibility for the preparation of the annual financial statements, which, in their opinion, fairly present the results and cash flows for the financial year and the state of affairs of Massmart Holdings Limited and its subsidiaries at the end of the financial year. The external auditors are responsible for reporting on the fair presentation of these financial statements.

The Company and its subsidiaries have maintained adequate accounting records and an effective system of internal controls to ensure the integrity of the underlying information. Appropriate accounting policies, supported by sound and prudent managerial judgements and estimates, have been consistently applied. The Audit and Risk Committee of the Board reviews the financial information presented and ensures that there has been adherence to International Financial Reporting Standards. Internal and External Auditors of Group companies have unrestricted access to the Committee.

Group financial results

The financial results of the Group are set out in the income statement, statement of comprehensive income, the statement of cash flows and the statement of changes in equity. The financial position of the Group is set out in the statement of financial position.


In light of the new South African Dividend Tax introduced with effect from 1 April 2012 ('Dividend Tax'), Massmart has adjusted the Company's dividend policy, which is now to declare and pay an interim and final cash dividend representing a 1.55 times dividend cover (the policy was 1.7 times dividend cover prior to the introduction of the Dividend Tax). For the period to June 2012, the Board has resolved to pay a final cash dividend equal to that of the prior year, notwithstanding the resultant lower dividend cover, due to the strong liquidity position of the Group and its growth prospects. The Group's final cash dividend has been adjusted to reflect the benefit to the Company of no longer paying the Secondary Tax on Companies ("STC") on the net dividend.

With regard to the final distribution to shareholders, the directors resolved to distribute to shareholders registered in the books of the Company on 14 September 2012, a final gross cash dividend of 146 cents (2011: 134 cents) per share, bringing the total dividend for the year to 398 cents (2011: 386 cents) per share. There were no STC credits available for use as part of the final cash dividend. The number of shares in issue at the date of this declaration was 216,146,751. The dividend was declared out of income reserves. The dividend was subject to the local dividend tax rate of 15% which resulted in a net dividend to those shareholders who are not exempt from paying dividend tax of 124.10 cents per share. Massmart’s tax reference number is 9900/196/71/9.

A Thuthukani dividend equivalent to 100% of the Massmart ordinary dividend per share (146 cents) was paid to the Massmart Thuthukani Empowerment Trust on 17 September 2012.

Alongside please find the movement in ordinary and preference shares for the period under review.


The Company's registered office and postal address are as follows:

Registered office
Massmart House
16 Peltier Drive, Sunninghill Ext 6, Sandton, 2146
South Africa

Postal address
Private Bag X4, Sunninghill, 2157, South Africa


Ordinary shares  
Closing balance June 2010 201,495,504
New shares issued 6,331,173
Converted preference shares* 6,056,783
Closing balance June 2011 213,883,460
New shares issued
Converted preference shares* 2,241,001
Closing balance June 2012 216,124,461
Preference shares  
Closing balance June 2010 21,545,193
New shares issued
Converted to ordinary shares 6,056,783
Closing balance June 2011 15,488,410
Converted to ordinary shares 2,241,001
Closing balance June 2012 13,247,409
* The preference shares relate to Massmart's Thuthukani Empowerment Trust and Black Scarce Skills Trust

Directorate and Secretary

The current directorate of the Company is shown on pages 18 to 21. In line with the Walmart International regional reporting structure that was implemented post the Massmart-Walmart merger, Doug McMillon, who is the Chief Executive Officer and President of Walmart International Operations resigned from the Massmart Board of Directors with effect from 20 August 2012. Doug was appointed to the Massmart Board upon completion of the Massmart-Walmart transaction on 20 June 2011.

David Cheesewright, who is the Chief Executive Officer and President of Walmart's Europe Middle East Africa (EMEA) region into which Massmart reports, has been appointed in Doug's stead with effect from 20 August 2012. David was previously appointed as an alternate director on the Massmart Board on 23 November 2011.

On 7 May 2012, Guy Hayward, who had been Chief Financial Officer since 2001, assumed the role of Chief Operating Officer. Ilan Zwarenstein, who has been Group Finance Executive since 2006, assumed the role of Financial Director, and was appointed to the Board and the Massmart Executive Committee, relinquishing the role of Company Secretary. These changes were required to enable greater operational focus on achieving the Group's ambitious strategic plans, whilst at the same time responding to the additional responsibilities created by the acquisition of a controlling stake in Massmart by Walmart.

The Board now comprises ten directors of whom seven are non-executive and four are independent. In addition, each Board Committee is chaired by an independent director.

The Company Secretary provides a central source of guidance and advice to the Board, and within the Company, on matters of ethics and good governance.

The Company Secretary is Philip Sigsworth, CA(SA), whose business and postal addresses are the same as that of the Company. Philip was appointed on 7 May 2012.

In accordance with the provisions of the Company's Articles of Association, D Cheesewright and I Zwarenstein will resign and JA Davis, NN Gwagwa and GRC Hayward will retire at the annual general meeting. Being eligible, D Cheesewright, JA Davis, NN Gwagwa, GRC Hayward and I Zwarenstein offer themselves for re-election.

Interests of directors in the Company's shares

At 24 June 2012, directors owned ordinary shares in the Company, or options over ordinary shares in the Company, directly or indirectly, aggregated as to beneficial and non-beneficial ownership, as follows:

  2012   2011
  Shares   Options   Shares   Options
  Beneficial   Non- beneficial   Beneficial   Non- beneficial   Beneficial   Non- beneficial   Beneficial   Non- beneficial
Non-executive directors                              
MJ Lamberti           245,000    
CS Seabrooke              
D Cheesewright              
JA Davis              
NN Gwagwa 9,800         9,800      
P Langeni 9,800         9,800      
CD McMillon 2,400              
JP Suarez              
Executive directors                              
GM Pattison 696,473     254,603     696,473     245,000  
GRC Hayward 394,394     270,529     394,394     36,750  
I Zwarenstein     202,659          

At the date of this report, the directors' holdings were as follows:

  2012   2011
  Shares   Options   Shares   Options
  Beneficial   Non- beneficial   Beneficial   Non- beneficial   Beneficial   Non- beneficial   Beneficial   Non- beneficial
Non-executive directors                              
MJ Lamberti           245,000    
CS Seabrooke              
D Cheesewright              
JA Davis              
NN Gwagwa 9,800         9,800      
P Langeni 9,800         9,800      
CD McMillon         2,400      
JP Suarez              
Executive directors                              
GM Pattison 696,473     254,603     696,473     354,603  
GRC Hayward 222,894     270,529     394,394     120,987  
I Zwarenstein     202,659          


As at the date hereof, the following companies are principal subsidiaries of the Company:

  • Massbuild (Proprietary) Limited (previously Builders Trade Depot)
  • Masscash Holdings (Proprietary) Limited
  • Massmart International Holdings Limited (incorporated in Mauritius)
47902 C1/GBL
  • Massmart Management & Finance Company (Proprietary) Limited
  • Masstores (Proprietary) Limited

Details of the Company's interests in material subsidiaries are set out in note 37. Total net profit after tax for all subsidiaries for the 2012 financial year amounted to R458.6 million (2011: R1,004.4 million).

Borrowing powers

In terms of the Articles of Association, the Group has unlimited borrowing powers. At 24 June 2012, borrowings were R2.1 billion (2011: R1.8 billion).

Holding company

The Company's holding company is Walmart Stores, Inc.

Going concern

The directors are of the opinion that the business will be a going concern in the year ahead. In reaching this opinion, the directors considered the following factors:

  • strong positive cash flows from trading;
  • no recurring operating losses at Divisional and Group level;
  • well-controlled working capital and good quality inventory;
  • approved short- and long-term financing, with sufficient additional short-term borrowing capacity if required;
  • key executive management in place;
  • there have been no material changes that may affect the Group in any of our customer, product or geographic markets; and
  • budgets to December 2013 reflect a continuation of the above positive issues.


On 9 March 2012 the Competition Appeals Court of South Africa dismissed a review application initiated by various Government ministries. Within the same order, the court also considered an appeal lodged by various trade unions. On the appeal, the court approved the merger between Walmart and Massmart subject to two conditions relating to prior retrenchments and Massmart's voluntary undertaking to create a Supplier Development Fund. Massmart has taken all necessary and reasonable steps to reinstate those employees who were subject to the retrenchment and presented themselves for reinstatement. With respect to the Supplier Development Fund condition, all parties to the litigation have now presented their views and we are now awaiting a final ruling from the court.

Change in year-end

In order to align the Group better with Walmart Stores, Inc. (Massmart's ultimate holding company), Massmart's year-end has changed from the end of June to the end of December.

The change in year-end means that Massmart will report audited results for the six months to December 2012 in February 2013, and audited results for the 12 months to December 2013 in February 2014.

Audit and Risk Committee report

The Audit and Risk Committee met four times during the year and the Internal and External Auditors presented formal reports to the Committee and attended meetings by invitation. In response to the requirements of the Companies Act, King III and in terms of its Charter, the Committee can report as follows:

  • The scope, independence and objectivity of the External Auditors was reviewed.
  • The audit firm Deloitte & Touche, and audit partner André Dennis, are, in the Committee's opinion, independent of the Company.
  • Ernst & Young have been proposed to the shareholders for approval to be the Group's auditor for the "financial year" ending 23 December 2012 (a six-month financial year occasioned by a change in year-end from June to December). The change in year-end and the proposal of Ernst & Young are both intended to align the Group better with Walmart. Ernst & Young, and audit partner Allister Carshagen, are, in the Committee's opinion, independent of the Company.
  • On an ongoing basis, the Committee reviews and approves the fees proposed by the External Auditors.
  • The appointment of the External Auditor complies with the Companies Act, as amended, and with all other legislation relating to the appointment of External Auditors.
  • The nature and extent of non-audit services provided by the External Auditors has been reviewed to ensure that the fees for such services do not become so significant as to call into question their independence.
  • The nature and extent of future non-audit services have been defined and pre-approved.
  • No reportable irregularities were identified and reported by the External Auditors to the Committee.
  • The Committee is satisfied that the internal financial controls of the Divisions and Group operated effectively throughout the 2012 financial year and can be relied upon. In addition, the Committee is satisfied with the Group's accounting policies and that these have been appropriately and consistently applied throughout the 2012 financial year.
  • The Committee reviewed this integrated annual report and recommended it to the Board for approval.
  • As at the date of this report, no complaints have been received relating to accounting practices and internal audit of the Company or to the content or auditing of the Company's financial statements, or to any related matter.
  • The Massmart website ( has a link enabling the general public to lodge complaints with the Committee. Since establishing this functionality in 2009, no complaints have been received.


Subsequent events

There are no subsequent events.

On behalf of the Board

Philip Sigsworth

Company Secretary

5 October 2012