Analyst Presentation of Reviewed Consolidated Results

Results Presentationfor 26 weeks ended 28 June 2015

Interim results Presentation August 2015 2

It’s tough out there!

The Environment

South Africa:

• Consumer confidence at 14-year low

• CPI range-bound but Food inflation soon to increase

• Manufacturing sector in technical recession. Load-shedding. Job losses

• And entering a 12–18 month interest up-cycle (+50bps?)

• Increasing legislative & regulatory demands

Africa:

• Many countries affected by double-dip of lower Commodities’ prices and USD strength

• Weak & volatile currencies

• USD is de facto currency

• But long-term potential remains intact


Divergent behaviour. Place your bets!

Retail Environment

• Upper-income consumers stable but confidence falling.

Lower asset prices now to compound this?

• Middle-income affected by job losses. Direction of the credit cycle unclear?

• Lower-income sustained by Commodities’ deflation, buffeted by job losses

• National sales data seems ok – are majors holding share at expense of weaker businesses?

• Time for caution in South Africa – too much space, too little volume growth?

• Intense competition in Retail Food

• Commodities in deflation, likely to reverse soon

• Weak demand and cost-inflation causing pressure along entire retail value chain

• Some retailers benefitting from weaker / failed formal competitors

• Retailers seeking new growth avenues: ex-SA, ex-Africa, new formats, new categories


Trust our model. Superb execution. Be patient and measured.

Massmart Response

• Grow market share in our major categories

• Very deliberate about our South African new space growth (only 0.8% space growth in H1)

• Invest in skills & capability – people, IT & Supply Chain – for the longer-term

• Customer traffic & loyalty through omni-channel

• African growth – Game, Builders Warehouse, and Cash & Carry –

measured and steady pace

• Reduce operating costs as % of sales (12-mth rolling Opex as % of sales is 16.3%)

• Maintain positive price-gap

• Acquire strategically significant prime real estate – avoids future cost inflation &

permanently secures retail site

• Supplier collaboration

• Private label


Financial PerformanceGreat sales growth, good margin management and decent cost control in tough environment.

26 weeks

June 2015

(Reviewed)

% of

sales

26 weeks

June 2014

(Reviewed)

% of

sales

Period

% growth

Comparable %

sales growth

Estimated

% sales

inflation

Sales 38,917.4 35,659.8 9.1 6.9 3.7

Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1

Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3

Massbuild 5,637.1 4,847.9 16.3 10.6 5.1

Masscash 13,547.5 12,926.7 4.8 3.9 3.6

Trading profit before interest and tax 806.7 2.1 729.9 2.0 10.5

Massdiscounters 29.6 0.3 27.4 0.3 8.0

Masswarehouse 461.3 4.3 406.5 4.2 13.5

Massbuild 243.9 4.3 186.2 3.8 31.0

Masscash 71.9 0.5 109.8 0.8 (34.5)


Short-term:

• Improving SA performance

• Food roll-out: 19 new / converted Fresh stores since June ‘14.

Sales participation now 19%

• Weak African environment. Negative Rand comparable sales growth

• Merchandise renewal – rationalise categories & merchandise ranges

• Improving in-stock service levels, and SA inventory below June ‘14

• Positive price-gap in GM and Food

Longer-term:

• Category renewal – Gen Merch & Food – younger, female, family

• Optimise supply chain utilisation

• SAP GK point-of-sales implementation in 2016, and SAP ERP likely

for 2017

Short-term trading recovery. Longer-term business renewal.

Perspective on Game


Short-term:

• Commodities (25% participation) in deflation – caused margin pressure.

Vibrant market

• Gained market share, despite soft market

• ARCH Enterprise IT system enabling regional buying & pricing

• Africa tough trading

Longer-term:

• We are a relationship business – very close to our customers

• Largest participant in SA formal Wholesale, and wholesale market

remains 20%-25% of total South African FMCG

• Drive lower operating costs from fewer & larger stores, Shield B2B,

logistics & DCs

• Be suppliers’ preferred distribution partner – an efficient & effective

route to market

Fluid market – consolidation opportunity. Transforming the business.

Perspective on Masscash Wholesale

Financial performance


Positive gearing of 3.6% from Sales to Operating Profit.

Strong performance

9,1%

10,9%

12,7%

Growth in Sales Growth in Gross profit Growth in Operating profit before

foreign exchange movements

and interest

+3.6%

+1.8%

+1.8%


Real comparable volume growth of 3.2% (June 2014: 2.3%).

Sales

Rm

26 weeks

June 2015

(Reviewed)

26 weeks

June 2014

(Reviewed)

%

growth

Comparable

% sales growth

Estimated

% sales inflation

Real comparable

volume growth

Total 38,917.4 35,659.8 9.1 6.9 3.7 3.2

Massdiscounters 8,973.6 8,225.8 9.1 4.1 2.1 2.0

Masswarehouse 10,759.2 9,659.4 11.4 11.4 4.3 7.1

Massbuild 5,637.1 4,847.9 16.3 10.6 5.1 5.5

Masscash 13,547.5 12,926.7 4.8 3.9 3.6 0.3

8,2%

91.8%

Rest of Africa sales SA sales

• Rest of Africa businesses’ sales growth:

Sales in ZAR grew by 14.6% and in constant local

currencies grew by 16.9%

• General Merchandise inflation remained steady at 3.6%,

Food & Liquor and Home Improvement inflation decreased

to 3.3% and 5.2% respectively


0,2 0,4 0,6 0,8 1,0 1,2 1,4

Jun-14

Sales-related gross

margin

Price-and-mix-

related gross

margin

Employment costs

Occupancy costs

Depreciation,

Amortisation and

Impairment of

Assets

Other operating

costs

Jun-15

Operating profit before forex and interest

• June 2014: Operating profit before forex of R702.9m

• Total Group sales for the period increased by 9.1%

• Gross profit for the period increased by 10.9%

• A strong trading performance in Makro and Massbuild

• Total increase of 12.2% / Comparable increase of 8.5%

• Increase in staff (Full-Time Equivalents) of 3.2% to +/- 44,000 FTE’s


• 3.4% increase of net new trading space since June 2014 to a total of

1,551,613m²

• Electricity, rates and taxes increased by approximately 9.5%

• Depreciation growth of 12.8% / Comparable increase of 8.2%


• June 2015: Operating profit before forex of R791.9 million

• Increase of 12.7%


Good Operating profit growth impacted by forex and interest

Rm

June 2015

(Reviewed)

June 2014

(Reviewed) % change

Operating profit before foreign exchange movements

and interest791.9 702.9 12.7

Foreign exchange loss (106.7) (7.9)

Net finance costs (234.8) (154.9)

Taxation (143.7) (164.1)

Profit for the period 306.7 376.0 (18.4)

Profit attributable to non-controlling interests (25.1) (26.0)

Profit and loss on disposals (12.3) 14.1

Headline earnings 269.3 364.1 (26.0)


Foreign Exchange Movements

80

85

90

95

100

105

110

Average African currency rate

• Majority of the forex loss is as a result of the weakening of the average basket of African

currencies against the Rand

• The strength of the US Dollar against the Rand exacerbated this loss

82%

12%

6%

Group loans and other monetary balances

Hedges

Other


Interest

Rm

June 2015

(Reviewed)

June 2014

(Reviewed) % change

Finance costs (252.5) (176.6)

Finance income 17.7 21.7

Net finance costs (234.8) (154.9) (51.6)

46%

19%

35%

Increase in finance costs attributable to:

Property acquistions Increased cost of funds Expansions and working capital


Working Capital

June 2015

(Reviewed)

June 2014

(Reviewed)

Inventories (Rm) 10,530.8 9,774.7

Inventory Days 61 61

Trade Debtors (Rm) 2,295.7 1,907.0

Debtors’ Days 10 9

Trade Creditors (Rm) 11,388.5 10,849.2

Creditors’ Days 58 60

• Good inventory management. Growth of 7.7% is below sales growth

• Supply chain efficiency efforts starting to yield

• Significant focus on and efforts to clear older stock in Massdiscounters continues

• Trade Creditors increased by 5.0% while Creditors’ days decreased


Capital Expansion

0,0

500,0

1 000,0

1 500,0

2 000,0

2 500,0

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

June 2011 June 2012 June 2013 June 2014 June 2015

Property acquisitions Businesses acquired

Investment to expand operations Investment to maintain operations

Total capex as a % of sales Total capex as a % of sales excl. business and property acqs

Ca

pex

as a

% o

f sa

les

• Total Capex as a % of sales: 2.7% (June 2014: 2.3%)

• Total Capex excl. business & property acquisitions as a % of sales:

1.7% (June 2014: 1.5%)

Rm


Strong investment in past continues into the future.

Capital Allocation

• Heavy Capex spent in past and future

• Committed to Africa

• African Real Estate will be different (i.e. Acquisition based)

• Investment into SAP and Supply Chain

• High degree of economic uncertainty and volatility

• Move to more conservative balance sheet


In summary

• For the first half of the year the Group managed to maintain or

gain market share in all of the major categories in which it trades

• Total sales growth was 9.1% (Jun 2014: 10.2%) and comparable sales growth was

6.9% (Jun 2014: 7.1%)

• Gross profit increased by 10.9%, bringing our margin to 18.9% (June 2014: 18.6%)

• Comparable expenses were well-controlled

• Foreign exchange loss of R106.7m (Jun 2014: R7.9m loss)

• Interest increased in line with expectation

• Operating profit before foreign exchange movements and interest increased by

12.7% (Jun 2014: -3.8%)

Strategic priorities

Improve

Profitability

Grow Builders

and Retail Food

in South Africa

Grow into Africa Grow Online

Improve profitabilityStrategic Priority 1

Fast fact

Massmart has the highest annual sales

densities in SA retail at R205m/store

and the lowest operating costs as a %

of sales at 16.3%


• Drive comparable sales with a clear and well executed value proposition

• Private labels – Trojan, CampMaster, LOGIK, Fired Earth, ECONO, Builders Pride, Marketside, Great Value, Equate, M, etc. – total sales penetration now 9.5%

• Existing & new stores – measured SA roll-out, selected ownership, lower cost of construction

• Leverage SAP and RDC investments

• Reduce non-trading space

• And focus on higher growth non-SA markets, Retail Food & Omni-channel

A focus on Sales, Operating Margin and Expenses.

Improve Profitability

Grow Builders and

Retail Food in South Africa

Strategic Priority 2

Fast fact

Recent Game research indicates

that 20% of customers shop the

store as a food destination


• Great total sales growth of 16.3% shows strength of this format

• Upweighting focus on our commercial & contractor customers

• Launched 2nd Pricelock campaign in March ‘15

• Private label 17.9% of the total sales – great innovation & value

• Gauteng RDC (opened in 2013) performing superbly. Replenishment 84% of total orders and

critical part of inventory optimisation

• Flexible Builders Warehouse store layout

• And Builders Express stores effective as a market “filler”

• Good learnings & success from new Superstore format. Approved another 10 stores

Leverage our investment in management, structure & SAP.

Grow Builders’ formats in SA


• Retail Food annualised sales now R15bn

• New Cambridge stores performing well. Disruptive format bringing Intense

competition in that market segment

• Continued positive customer response to Makro offering. Sales growth of 9.2%

• Game Food grew at 20%. Approx 40% of customers on Food mission bought

other non-Food items. Clearer range & assortment

• Better leverage of Fruitspot across Cambridge, Makro and Game stores in

Gauteng. Great price & quality

• Our Marketside brand now across fresh produce, bakery and butchery in Game,

Makro and Cambridge Food

Build a Retail Food proposition on the General Merchandise and Wholesale platforms.

Grow Retail Food in SA


Game Food Case Study

Grow into AfricaStrategic Priority 3

Fast fact

Average sales in each Massmart

store ex-SA is typically 3.5 times

greater than that of SA retail peers


• Currently 35 stores in Africa, representing R6.5bn sales, in 13 countries

• Currency devaluations and related consequences difficult to manage

• New Game stores in Kitwe, Zambia, & Nairobi, Kenya, in H1

• Yesterday opened first multi-format (Builders & Game) development in Matola, Mozambique

• Builders Warehouse performing very well in Botswana & Mozambique.

Will open first store in Lusaka, Zambia, in Q4

• 20% of Masscash Wholesale sales are ex-SA, mainly Botswana. Exploring further C&C sites

in Mozambique and Zambia

• Anticipate opening 8 new stores in next two years. Nigeria, Ghana & Zambia

• Bespoke African Retail Potential study confirms significant potential of our formats across

key African countries

To leverage South African market leadership and operating strengths in sub-Saharan Africa. Large prize but measured roll-out.

Grow into Africa

Grow onlineStrategic Priority 4

Fast fact

Makro online has had

8.4 million unique visitors since

launching in April 2014


To build a profitable omni-channel presence synergistic with Massmart category market leadership and customer needs.

Grow online

• Total online sales (including Masscash B2B) are 5.1% of Group sales

• Visits to DionWired site are up 17%, average basket size is up 7%

• Makro GM online launch annualised, and Q2 visits were up 61%, with sales up 148%

• Field-testing Makro pick-up lockers at selected Sasol and McDonalds' sites

• Makro’s commercial online platform to launch in October ‘15

• Masscash trialling store-based online ordering capability

• Initiating SAP online project in Builders Warehouse targeting trade customers.

Launch in mid-2016

• Together with major telco, are developing innovative FMCG digital solution for

Wholesale customers


H1 Sustainability Highlights

• 14 000 MWh of electricity saved, increasing total

saved since January 2014 to 83 000 MWh

• 1 325 environmentally responsible products added,

achieving sales of R260m

• Estimated 9 415 tons of paper, plastic and board

recycled, representing 53% of primary waste

produced during the period

• 20 million meals prepared in 280 Massmart

sponsored mobile kitchens, serving in excess of

200 000 primary school learners

• Great achievements in Supplier Development Fund

(see booklet)

Prospects

• For the 33 weeks to 16 August 2015, total sales increased by

8.7% and comparable sales by 6.8%

• We are confident about delivering our strategic priorities, but

the economic environment may be a constraining factor in

FY15 & FY16

Any reference to future financial performance included in this document has not been reviewed or reported on by the Group’s external

auditors. The auditor’s report does not necessarily report on all of the information contained in this announcement/financial results.

Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should

obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office.

For further details, go to

massmart.co.za/interimresults2015

Additional information

• Condensed Consolidated Income Statement

• Tax rate reconciliation

• Cash Flow Statement

• Store portfolio

• Store portfolio including location of stores

• Forecast stores: July 2015 – June 2017

• Capex per category

• Number of shares


Condensed Consolidated Income Statement for the 26 Weeks ended 28 June 2015

Rm

26 weeks

June 2015

(Reviewed)

26 weeks

June 2014

(Reviewed) % growth

Revenue 38,980.7 35,756.5 9.0

Sales 38,917.4 35,659.8 9.1

Cost of sales (31,545.8) (29,010.2) (8.7)

Gross Profit 7,371.6 6,649.6 10.9

Other income 63.3 96.7 (34.5)

Depreciation and amortisation (461.7) (409.2) (12.8)

Impairment of assets (3.4) (14.9) 77.2

Employment costs (3,236.8) (2,885.1) (12.2)

Occupancy costs (1,415.7) (1,311.0) (8.0)

Other operating costs (1,525.4) (1,423.2) (7.2)

Operating profit before foreign exchange movements and interest 791.9 702.9 12.7

Foreign exchange (loss) / gain (106.7) (7.9)

Operating profit before interest 685.2 695.0 (1.4)

Net finance costs (234.8) (154.9) (51.6)

Profit before taxation 450.4 540.1 (16.6)

Taxation (143.7) (164.1) 12.4

Profit for the year 306.76 376.0 (18.4)


Tax Rate Reconciliation

%

26 weeks

June 2015

(Reviewed)

26 weeks

June 2014

(Reviewed)

Standard tax rate 28.0 28.0

Non-taxable income and disallowable expenses 4.7 3.3

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

Assessed loss not utilised 4.8 3.1

Other - including foreign tax adjustments (5.5) (3.9)

Group tax rate 31.9 30.4


Cash Flow Statement

Rm

June 2015

(Reviewed)

June 2014

(Reviewed)

Operating cash before working capital movements 1,308.0 1,137.5

Working capital movements (2,925.3) (2,519.9)

Cash utilised by operations (1,617.3) (1,381.8)

Net interest and tax paid (523.1) (616.0)

Net investment to maintain operations (365.5) (326.1)

Free cash flow (2,505.9) (2,323.9)

Dividends paid (622.8) (597.0)

Investment to expand operations and other net investing

activities(290.0) (256.1)

Cash outflow before financing activities (3,418.7) (3,177.0)


Store Portfolio

December 2014 Opened Closed June 2015

Number of stores 392 10 -4 398

Massdiscounters 153 5 - 158

Masswarehouse 19 - - 19

Massbuild 100 2 -3 99

Masscash 120 3 -1 122

Massdiscounters:

• Opened 4 Game stores (one in Kenya and one in Zambia) and one DionWired store

Massbuild:

• Opened one Builders Warehouse store and one Builders Express store

• Closed one Builders Express store and two Builders Trade Depot stores

Masscash:

• Opened three and closed one Retail stores


Massdiscounters Masswarehouse Massbuild Masscash Total

December 2014 153 19 100 120 392

Opened:

5 – 2 3 10

Game: 2 Africa

stores

Game: 2 SA

stores

DionWired: 1 SA

store

BWH: 1 SA

store

BEX: 1 SA store

Retail: 3 SA

stores

Closed

– – –3 –1 –4

BEX: 1 SA store

BTD: 1 SA store

Retail: 1 SA

store

June 2015 158 19 99 122 398

Store Portfolio including location of stores


June 2015

Forecast new stores

Jul 2015 – Jun 2017 June 2017

Number of stores 392 51 449

Massdiscounters 158 14 172

Masswarehouse 19 2 21

Massbuild 99 18 117

Masscash 122 17 139

% increase

Trading space (m2) 1,551,613 155,282 1,706,895 10.0

Massdiscounters 521,892 43,032 564,924 8.2

Masswarehouse 195,794 24,000 219,794 12.3

Massbuild 434,534 46,500 481,034 10.7

Masscash 499,393 41,750 441,143 10.5

• Massdiscounters: Game SA – 6; DionWired – 4; and Game Africa - 4 (Mozambique 1, Nigeria 2 and Zambia 1)

• Masswarehouse: Makro – 2

• Massbuild: BWH SA - 3; BEX – 3; BSS - 9; BW Africa - 1 (Zambia 1); and BSS Africa – 2 (Mozambique 1 and Zambia 1)

• Masscash: Retail – 15; Wholesale SA – 1; and Wholesale Africa - 1 (Mozambique 1)

• The 10.0% increase in trading space above includes a 21.9% increase in our Rest of Africa trading space

Forecast stores: July 2015 – June 2017


Capex per category

Rm

26 weeks

June 2015

(Reviewed)

26 weeks

June 2014

(Reviewed)

Land and buildings/leasehold improvements 155.0 85.6

Vehicles 6.3 7.5

Fixtures, fittings, plant and equipment 110.9 147.7

Computer hardware 8.1 6.0

Computer software 8.9 9.4

Other – 6.8

Investment to expand operations 289.2 263.0

Land and buildings/leasehold improvements 56.6 31.3

Vehicles 26.6 40.1

Fixtures, fittings, plant and equipment 214.3 196.8

Computer hardware 47.6 47.8

Computer software 20.4 16.3

Investment to maintain operations 365.5 332.3


Number of shares

‘000

At December 2014 217,118

Shares issued 18

At December 2015 217,136

Weighted-average at June 2015 216,764

Diluted weighted-average at June 2015 220,020

Documents

Analyst Presentation of Reviewed Consolidated Results