Financial Performance Report Financial Performance Publication date: May 2019 Next publication: May 2020 Financial Performance Report Financial Performance

Started and ended at 10.25% (10% for six months) Trading Context for the Massmart Financial Period The 12 months to December 2018 saw retailers facing continued tough market conditions that have become the new normal for South African retailers. GDP growth +0.8% with the economy in a technical recession for the first half of 2018. Consumer confidence recovered in unprecedented form as the country’s leadership changed (CCI: 15.5) with the next survey showing a decline, as expected. Growth in total retail trade sales showed some recovery at an average growth of +2.1% but has slowed over the last few months. Retail sales in food and beverages declined -1.6%.  Rand volatility saw the currency fluctuate in response to domestic and international changes. Inflation consistently within the target has contributed to the Reserve Bank decision to drop the repo rate causing the interest rate to decline to 10% from 10.25% at the beginning of the year but ended where it started as a pre- emptive from the SARB. Against this backdrop, and during a period of significant restructuring, Masscash delivered sales growth +2.1% (adjusted). In addition, the division faced a period of severe commodity deflation, negatively impacting on Wholesale sales growth, which came out at +2.3%. Retail sales growth +1.8%, in line with the market. Non-SA sales +6.3% (4.2% in constant currencies). Economic Indicators for Massmart Group FY2018 period (January to December 2018) GDP Growth 0.8% CPI 4.6% Fuel Price Increased +6% since Jan 2018 CPI Food and Non-Alc Bev 3.6% R/$ Exchange Rate 17% weaker since Jan 2018 RMB/BER Consumer Confidence Index (CCI) 15.5 Interest Rate Started and ended at 10.25% (10% for six months) Growth in Retail Trade Sales 2.1% % of Household Debt as % of disposable income ave 71.9% Growth in Food and Beverage Retail Sales -1.6% SOURCE: Ti Economic Indicators Report, StatsSA NOTE: 2017 figures have been restated to a like-for-like basis to remove the IFRS 15 impact whereby turnover generated as an agent on behalf of a third are no longer included in the reporting of revenue. So the turnover from Shield Buying Group has been excluded from both 2018 and the comparable 2017 period to allow for meaningful assessment

Massmart Group Performance Analysis of the Group’s financial results was complicated by a mix of factors unique to Massmart’s business 1. The Group underwent a restructure and relocation of Massdiscounters and Masscash causing some disruption and once-off restructuring costs 2. Accounting changes with new IFRS coming into effect, such as Shield’s sales being excluded 3. 52-week trading year versus 53 weeks in the prior period as such adjusted growths have been included Metric FY20171 53 weeks FY2018 Turnover Performance Turnover Comparable turnover +2.7% to R93.7bn -0.8% -3.0% to R90.9bn (52:52 = +2.9%) +1.2% (Adj 52:52) Profitability Performance Gross profit Gross profit margin Trading profit2 Trading profit margin2 Operating profit Operating profit margin +1.9% to R17.65bn 18.8% (19.63% 52:52) +4.2% to R2.74bn 2.93% (2.66% 52:52) +8.9% to R2.73bn 2.91% (2.81% 52:52) +0.2% to R17.7bn (52:52 = +2.0%) 19.45% -24.6% to R2.1bn (52:52 = -16.8%) 2.28% -30.7% to R1.89bn (52:52 = -23.9%) 2.08% Operational Performance Internal Inflation Inventory Level HEPS 2.0% -2.0% to R11bn +13.6% to 688.2 cents 0.2% +10.9% to R12.2bn -39.5% to 416.5 cents “There were some very real issues in the market that affected us; […] there were some very real issues inside the business that we could have handled better. But undoubtedly it was a very difficult year” - Guy Hayward, Massmart Group CEO SOURCE: Massmart Holdings NOTE: 1 2017 onwards figures have been restated to remove the IFRS 15 impact whereby turnover generated as an agent on behalf of a third are no longer included in the reporting of revenue. (i.e. excluding Shield). 2 Trading profit excludes restructure costs

Masscash Divisional Performance Metric FY2017 (53 weeks) FY2018 Turnover Performance Group Turnover Growth Masscash Turnover Masscash Comparable Turnover % of total group turnover +2.7% to R93.7bn +2.3% to R32.5bn -4.2% 31.8% -3.0% to R90.9bn (52:52 = +2.9%) -11.7% to R28.7bn (52:52 = +2.1%) -0.2% % (Adj 52:52) 31.5% Profitability Performance Group trading profit before tax Group Trading Margin Masscash trading profit Masscash Trading Margin +4.2% to R2.74bn 2.93% (2.66% 52:52) -35.4% to R179m 0.6% (0.4% 52:52) -24.6% to R2.1bn (52:52 = -16.8%) 2.28% +5.4% to R188m (52:52 = +48.4%) 0.7% Operational Performance Group Internal inflation Masscash Internal inflation 2.0% 3.9% 0.2% 0.3%

Massmart Group Performance Group turnover growth +2.9% to R90.9bn in FY2018 (FY2017 Adj: R88.4bn – adjusted to exclude Shield sales and remove the extra week). 52:53 week growth -3.0% with softer sales in November and December (comp -0.9%) a trend seen across SA Comparable turnover growth +1.2% (Adj: -4.7%), suggested comparable volume growth +1.4% Online sales growth +56% for FY2018 at 1.1% sales participation from those categories that are online ‘Black Friday’ was considered a success with R1.8bn sales over three days and +16% sales growth, reporting customers cutting back on purchases before the promotion and shopping the deals Food and liquor turnover growth reported at +3.3%. Food +0.7% and Liquor +11.8% Durables turnover +0.7% with strong market share reported despite the soft demand Continuing strong market share in numerous categories, including large appliances with over 39% market share1, small appliances, Hi-tech and most DIY and hardware categories Home improvements turnover +5.9% as retail participation increased in Massbuild division Private Label participation at 9.0% in total, Food participation declined to 5.6% (FY2017: 5.9%), participation increased for GM to 13.9% (FY2017: 13.8%) and home improvements to 19.7% (FY2017: 18.8%) Value-Added Services +61% growth to R250m in gross revenue, RCS and bill payments – focus on a competitive range The DCs from Massdiscounters and Makro were transitioned into a new business unit under Massmart Logistics to be used as a Group asset thereby improving DC cost recoveries and increasing transport efficiencies R125m in saving reported from Group-wide logistics efficiencies SOURCE: Massmart Holdings NOTE: GFK SA Dec 2018

Massmart Group Performance (cont.) Massmart South Africa Massmart SA sales growth at +2.9% for FY2018 to R83bn, accounting for 91.3% of Group sales Comparable sales +1.5% Food and liquor turnover contributes 56% to SA sales with +3.2% sales growth Durables make up the other 44% of sales, with reported growth +4.4% Massmart Non-SA Trading in 12 Non-SA countries across 47 stores Turnover growth +3.7% in rands to R7.9bn, accounting for 8.7% of Group sales Non-SA accounts for 19% of Massdiscounters sales, 11% of Masscash and 8% of Massbuild sales Average sales in a Non-SA store is reportedly three times higher than those of many other SA competitors Trading space +5.8% growth In constant currency1 turnover growth +3.9% (comp +0.5%) Rand sales improved in H2 due to positive currency movements Food and liquor turnover contributes 51% to Non-SA sales with growth +4.9% The balance of 49% of the sales is from durables, which increased +2.4% NOTE: All growth are adjusted to 52:52 weeks and IFRS. Constant currency excludes the effect of foreign currency fluctuations SOURCE: Massmart Holdings

Divisional Performance Masscash Trading in a competitive wholesale and retail food environment, turnover R28.7bn, -11.7% growth (52:53 weeks), however adjusted growth +2.1% Comparable growth at -0.2% Masscash contribute 31% to Group Turnover Wholesale +2.3% benefitting from less deflation Retail (Cambridge and Rhino) sales +1.8%, in-line with the market Internal inflation +0.3% as deflation eased for commodities Jumbo and Cambridge HO merged and relocated to JHB from Jun 2018 at a cost of R44.9m, with an anticipated annual saving of R22m per year, some trading benefits of this restructure are reported to have begun to show in H2 Non-SA +6.3%, +4.2% in constant currencies The division hopes to see their competitiveness improve in the future as tax compliance and enforcement could level the playing field SOURCE: Massmart Holdings

Group Profitability Gross Profit Gross profit increased +0.2% to R17.7bn in FY2018, adjusted for the extra week in FY2017, growth +2.0%, with a slight decline in gross profit margin from 19.63% to 19.45% for the year Attributed to: Margin pressure in Game Stock adjustments in Massfresh Offset, in part, by the higher retail participation in Massbuild SOURCE: Massmart Holdings

Group Profitability (cont.) Operating Expenses Expenses increased +5.0% in FY2018, this is excluding restructuring costs. With divisions reporting good expense management. Comparable expenses increasing +2.3%, below inflation Masscash expense growth was limited to only +0.6% Operating Expenses Analysis – FY2018 Expense Growth Comp Growth Attributed to: Total 5.0% 2.3% Employment costs 2.7% 0.0% Better scheduling in stores and the DCs Full-time employees +1.0% to 48,500 Depreciation 3.2% -1.1% IT equipment and software – GK POS Lower CAPEX spend Changes due to IFRS Occupancy costs1 10.1% 6.3% Trading space +2.2% and Makro Riversands rental annualised Rates increased Other operating expenses 5.8% 4.6% Leveraging Group synergies and containing costs increased admin efficiency from lower support service costs Also including R58m on non-capital IT upgrade costs and store opening expenses SOURCE: Massmart Holdings NOTE: IFRS 16 came into effect 1/1/19 means that going forward, fro FY19, operating lease cost will be replaced by amortisation of the right-of-use asset and calculated lease finance costs on the interest line

Trading Profit Growth Adj 52:52 Group Profitability (cont.) Divisional Trading Profit Group trading profit declined -16.8% to R2.1bn in FY2018 , excluding restructure costs and adjusted for the 53rd week in FY2017 and Group trading profit margin declined to 2.27% Masscash reported trading profit of R188.6m for FY2018, this is +48.4% on LY due to the improved, albeit low, trading margin 0.7% Divisional Trading Profit – excluding restructure costs – FY2018 Trading Profit (R’m) Trading Profit Growth Adj 52:52 Trading Margin FY2017 Adj 52 weeks Trading Margin FY2018 Attributed to: Massmart Group R 2 069 -16.8% 2.65% 2.27% Solid expense management could not offset the weak sales in Nov and Dec Masscash R 188.6 48.4% 0.39% 0.7% Margin improved in H2 Less deflation in wholesale

Group Profitability (cont.) Operating Profit Operating profit before interest declined -30.7% in FY2018 to R1.9bn Operating profit margin at 2.1% (FY2017: 2.8% adjusted) Included in the operating profit is a foreign exchange loss of –R2.7m (FY2017: -R47.2m) Also included is the restructure costs of R161m – the Group anticipates an annual saving of R52m as a result of the restructure SOURCE: Massmart Holdings

Operational Overview CAPEX CAPEX declined -11.6% in FY2018 to R1.6bn 40% of FY2018 CAPEX was used for IT as massive IT infrastructure changes are implemented New store related CAPEX has declined in-line with the Group’s strategy to curtail new store growth and focus on reducing working capital levels CAPEX (R’m) and CAPEX % Change YoY FY2014 FY2015 FY2016 FY2017 FY2018 CAPEX R 2,194 R 1,710 R1,781 R 1 817 R 1 606 CAPEX % Change 6.6% -22.0% 5.1% 2.0% -11.6% CAPEX as a % of Turnover 2.8% 1.9% 1.8% SOURCE: Massmart Holdings

Operational Overview (cont.) Internal Product Inflation Group internal product inflation for F2018 was reported at +0.2%, at HY2018: -0.7%. This was below the CPI average for the period of 4.6% Durables -2.1% and Home improvement +0.9% Food and liquor product inflation +1.1% (food deflation -1.1% and Liquor +2.2%) having a negative impact on food sales growth, especially in wholesale Inflation FY2014 FY2015 FY2016 FY2017 FY2018 CPI Average for Period 6.1% 4.6% 6.3% 5.3% CPI Food1 4.8% 5.1% 10.5% 7.0% 3.6% Group Internal Inflation -1.3% 2.0% 0.2% Masscash 2.9% -1.4% 3.9% 0.3% Masscash reported internal inflation of +0.3% for FY2018, significantly lower than FY2017: 3.9%. Commodity prices faced deflation in FY2018, although easing in H2 (H1: internal inflation -0.3%) Inventory Levels Inventory levels increased +10.9% to R12.2bn Inventory days at 61 days (FY2017: 56 days) Increase in net trading space +2.2% Lower than anticipated December sales for Game and Builders leaving the divisions heavier than planned Strategic buy-ins, especially impactful for Masscash who have been strategically increasing stock levels to improve service-levels SOURCE: Massmart Holdings, Ti Economic Indicators report, StatsSA NOTE: 1 Including non-alcoholic beverages, this is an average over 12 months

Outlook Trading is challenging for South African retailers, this is the new normal. Facing a climate of geo-political uncertainty and declining globally growth forecasts, South Africa’s GDP forecast for 2019 is now below 1.5%. Domestic policy challenges, upcoming elections, fiscal constraints, high unemployment, low business and consumer confidence and low investment growth compound the pressure on consumers disposable income. In this environment the Group continues to settle from the massive restructuring of two divisions, gearing to reap the rewards of system enhancements across the Group to facilitate collaboration and value-added services improvements, as well as achieve the fine and important balance between inter-divisional co-operation and competition. A difficult year, to be sure. But by following the tight expense management we have become accustomed to seeing at Massmart and remaining resolute about their strategic focus areas, we look in anticipation to the Group forging ahead on sound footing.

Maryla Masojada | Head Analyst Kate Shirley | Retail Analyst Kate Shirley | Retail Analyst New Channels Carey Leighton | Associate Retail Analyst Maryla Masojada | Lead Analyst Tel: +27 (0) 31 303 2803 Fax: +27 (0) 31 303 4560 info@tradeintelligence.co.za Tel: +27 (0) 31 303 2803 Fax: +27 (0) 31 303 4560 info@tradeintelligence.co.za Tel: +27 (0) 31 303 2803 Fax: +27 (0) 31 303 4560 info@tradeintelligence.co.za Maryla Masojada | Head Analyst Kate Shirley | Retail Analyst Kate Shirley | Retail Analyst – New Channels Maryla Masojada |Head Research Kate Shirley | Retail Analyst – New Channels Maryla Masojada |Head Research Kate Shirley | Retail Analyst – New Channels Maryla Masojada |Head Research tel +27 31 303 2803 fax +27 31 303 4560 info@tradeintelligence.co.za Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence