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Woolworths Holdings Limited - Audited Group Results for the year ended 30 June
2004
WOOLWORTHS HOLDINGS LIMITED
(Registration number : 1929/001986/06)
ISIN Code: ZAE000028288
JSE Code : WHL
Audited group results for the year ended 30 June 2004
another year of continued growth
* Revenue up 11.8%
* Operating profit up 19.6% - over R1bn
* HEPS up 21.3%
* Distribution per share up 32.8%
* Foods market share at all time high
* 3-year compound annual growth
* HEPS up 34.5%
* Distribution per share up 36.9%
* ROE 12.9% in 2001 to 25.7%
INCOME STATEMENT
Year ended
30 June
2004 2003 %
Note Rm Rm Change
Revenue 11 281.7 10 094.8 11.8
Turnover 10 648.8 9 500.3 12.1
Cost of merchandise 7 262.2 6 358.6 14.2
Gross profit 3 386.6 3 141.7 7.8
Other revenue 632.9 594.5 6.5
Expenses 2 957.7 2 848.2 3.8
Depreciation 232.8 227.1 2.5
Occupancy cost 544.4 512.4 6.2
Employment cost 1 303.2 1 276.5 2.1
Other operating cost 877.3 832.2 5.4
Operating profit 1 061.8 888.0 19.6
Interest paid 108.7 87.4 24.4
Net profit before exceptional
items 953.1 800.6 19.0
Exceptional items 2 (16.4) (22.2)
Net profit before tax 936.7 778.4 20.3
Tax 3 268.9 227.4 18.2
Net profit after tax 667.8 551.0 21.2
Outside shareholders" interest (1.0) (1.4)
Net profit attributable to
ordinary shareholders 666.8 549.6 21.3
Reconciliation of headline earnings
Attributable earnings - all
operations 666.8 549.6 21.3
Goodwill amortisation 10.1 10.0
Loss on disposal of property,
plant and equipment net of outside
shareholders" interest 0.1 4.9
Reversal of provision for loss
on discontinuance
net of outside shareholders" interest - (1.3)
Headline earnings 677.0 563.2 20.2
Headline earnings per share (cents) 78.6 64.8 21.3
Earnings per share (cents) 77.4 63.3 22.3
Diluted earnings per share (cents) 4 75.3 61.9 21.6
Distributions per share (cents) 5 38.5 29.0 32.8
Distribution cover 2.0 2.2
Number of shares in issue (millions) 868.3 853.1 1.8
Weighted average number of shares
in issue (millions) 861.2 868.5 (0.8)
GROUP ANALYSIS
Revenue
Turnover 10 648.8 9 500.3 12.1
Woolworths 9 715.4 8 430.0 15.2
- Clothing and home 4 792.2 4 280.4 12.0
- Foods 4 747.1 3 980.8 19.2
- Logistics services and other 176.1 168.8 4.3
Country Road 933.4 1 070.3 (12.8)
Interest 543.4 522.3 4.0
Other revenue 89.5 72.2 24.0
11 281.7 10 094.8 11.8
Operating profit
Woolworths 1 048.4 870.7 20.4
Country Road 13.4 17.3 (22.5)
1 061.8 888.0 19.6
CASH FLOW STATEMENT
Year ended
30 June
2004 2003
Rm Rm
Cash flow from operating activities
Cash inflow from trading 794.4 681.0
Working capital movements (7.5) 104.4
Cash applied to financial services assets (709.8) (461.6)
Cash generated by operating activities 77.1 323.8
Interest received 540.9 519.5
Interest paid (105.8) (87.4)
Tax paid (331.5) (191.7)
Cash generated by operations 180.7 564.2
Distributions to shareholders (271.7) (201.3)
Net cash (outflow)/inflow from
operating activities (91.0) 362.9
Cash outflow from investing activities (393.2) (322.2)
Cash flow from financing activities
Shares issued 54.5 39.5
Shares repurchased by subsidiary - (235.1)
Net cash inflow/(outflow) from
financing activities 54.5 (195.6)
Decrease in cash and cash equivalents (429.7) (154.9)
Cash acquired on acquisition of
subsidiary - 10.2
Cash and cash equivalents at the
beginning of the year (514.7) (362.0)
Effect of foreign exchange rate changes (5.5) (8.0)
Cash and cash equivalents at the end
of the year (949.9) (514.7)
GROUP ANALYSIS
Cash generated by operations
- before tax 512.2 755.9
Woolworths 472.8 696.8
Country Road 39.4 59.1
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS" INTEREST
Year ended
30 June
2004 2003
Rm Rm
Ordinary shareholders" interest at
the beginning of the year 2 412.4 2 337.3
As previously reported 2 336.1
Adjustment to opening balance arising
from the change in accounting policy
for the consolidation
of the share trust 1.2
Movements for the year:
Share premium arising from shares
issued under share
purchase scheme 54.5 39.5
Shares repurchased by subsidiary - (235.1)
Recognised gains and losses 383.9 270.7
Distributable reserves 406.2 306.1
Net profit attributable to ordinary
shareholders 666.8 549.6
Distributions to shareholders (271.7) (201.3)
Net fair value adjustment on financial
instruments 11.1 (42.2)
Non-distributable reserves
Exchange differences on translation of
foreign entities (22.3) (35.4)
Ordinary shareholders" interest at the
end of the year 2 850.8 2 412.4
BALANCE SHEET
At
30 June
2004 2003
Rm Rm
ASSETS
Non-current assets 1 757.7 1 560.2
Property, plant and equipment 1 192.4 1 037.6
Investments 18.6 12.4
Loans to customers 162.5 182.3
Participation in export partnerships 171.6 183.2
Goodwill - 10.1
Other loans 143.9 117.7
Deferred tax 68.7 16.9
Current assets 3 992.3 3 235.3
Inventories 576.4 564.4
Woolworths card debtors 2 148.2 1 669.3
Credit card receivables 178.7 105.9
Accounts receivable 459.4 382.2
Loans to customers 415.6 273.1
Tax 26.0 24.4
Cash 188.0 216.0
Total assets 5 750.0 4 795.5
EQUITY AND LIABILITIES
Capital and reserves 2 873.2 2 434.6
Ordinary shareholders" interest 2 850.8 2 412.4
Outside shareholders" interest 22.4 22.2
Non-current liabilities 337.8 285.1
Post-retirement medical-aid liability 151.2 130.8
Deferred tax 186.6 154.3
Current liabilities 2 539.0 2 075.8
Accounts payable 1 132.9 1 039.3
Provisions 113.6 111.5
Tax 154.6 194.3
Interest bearing borrowings 1 137.9 730.7
Total equity and liabilities 5 750.0 4 795.5
Net asset book value - per share (cents) 328.3 282.8
GROUP ANALYSIS
Total assets 5 750.0 4 795.5
Woolworths 5 429.4 4 431.6
Country Road 320.6 363.9
Inventories 576.4 564.4
Woolworths 472.6 433.3
Country Road 103.8 131.1
Approved commitments for capital expenditure
for the next financial year 298.5 189.2
Woolworths 259.1 152.6
Country Road 39.4 36.6
SEGMENTAL ANALYSIS
Operating results Revenue Net profit before tax
2004 2003 % 2004 2003 %
Rm Rm change Rm Rm change
Retail
Woolworths 9 751.2 8 466.6 15.2 715.6 550.1 30.1
Country Road 948.6 1 081.9 (12.3) 8.8 13.1 (32.8)
Financial services 647.3 601.7 7.6 212.3 215.2 (1.3)
Intragroup (65.4) (55.4)
Total group 11 281.7 10 094.8 11.8 936.7 778.4 20.3
Balance sheets Capital and reserves Return on Equity
2004 2003 % 2004 2003
Rm Rm change % %
Retail
Woolworths 911.8 788.5 15.6 61.1 47.0
Country Road 186.8 185.4 0.8 4.8 5.4
Financial services 1 774.6 1 460.7 21.5 9.3 11.1
Total group 2 873.2 2 434.6 18.0 25.7 23.7
NOTES
1. The financial statements comply with South African Statements of Generally
Accepted Accounting Practice. Accounting policies used are consistent with those
applicable for the June 2003 financial statements, except as follows:
Following the recommendation issued by the JSE Securities Exchange, the
Woolworths Holdings Share Trust was consolidated. As a result, a cumulative
adjustment to increase the opening retained profit in the prior year of R1.2m
was required. There was no effect on the income statement.
The format of the cash flow statement has been revised to include cash applied
to financial services assets as a separate line item under operating activities.
The cash flow from the Woolworths card debtors was previously included in
working capital movements. Cash flows from loans to customers and credit card
receivables have been reclassified from investing to operating activities.
2. Exceptional items
2004 2003
Goodwill amortisation 10.1 10.0
Provision for onerous lease commitments 6.3 13.7
Reversal of provision for loss on discontinuance - (1.5)
16.4 22.2
There is no tax effect arising from the exceptional items, other than in respect
of the onerous lease provision, of R1.9m (2003: R4.1m).
3. The effective tax rate of 28.7% (2003: 29.2%) is mainly due to the
utilisation of tax losses in subsidiaries.
4. The difference between earnings per share and diluted earnings per share
results from outstanding options.
5. Distributions comprise the interim distribution of 13.0c per share, paid on 8
March 2004 and the final distribution from share premium of 25.5c per share
declared on 18 August 2004.
6. Gross capital expenditure on property, plant and equipment
2004 2003
Woolworths 392.5 377.9
Country Road 33.9 36.2
426.4 414.1
7. Unutilised banking facilities amount to R1 098.7m (2003: R1 266.8m). In terms
of the Articles of Association, there is no limit on the group"s authority to
raise interest bearing debt.
8. The group"s annual financial statements have been audited by the group"s
joint auditors Ernst & Young and SAB & T Inc and a copy of their unqualified
report is available for inspection at the company"s registered office.
COMMENTARY
Group results
The board is pleased to report another year of growth with a 21.3% increase in
headline earnings per share for the financial year to June 2004, increasing from
64.8 cents per share to 78.6 cents per share. Group ROE has improved from 23.7%
to 25.7%. In lieu of a dividend, a distribution from share premium of 25.5 cents
per share is declared, taking total distributions for the year to 38.5 cents per
share, up 32.8% from last year.
Trading environment
The South African retail environment was characterised by buoyant consumer
demand. South Africans are feeling good about their country. Interest rates and
personal debt levels are at their lowest for many years. Ten years into our
democracy the growing number of economically active consumers has broadened,
assisted by employment equity and empowerment and are benefiting all sectors of
the retail industry.
The strong rand created difficult trading conditions for international franchise
operations.
In Australia, consumer spending continued to grow supported by improved tax
benefits, which offset a levelling in house prices.
Financial review
Group turnover increased by 12.1% to R10.6bn.
In the Woolworths operating group, Clothing and Home grew turnover by 12.0%.
Imported merchandise, cheaper through the strengthening of the rand, made us
less competitive. The Foods business grew by 19.2% which was well ahead of the
market.
Country Road"s sales declined by 6.5% in Australian dollar terms, in part
affected by reduced wholesale sales following the decision to focus on a single
wholesale customer. In addition, sales in rand terms were negatively impacted by
the strengthening of the rand against the
Australian dollar.
The group"s gross profit percentage declined from 33.1% to 31.8% due to the
larger contribution from the Foods business and local franchise operations both
of which enhanced total operating profit.
Operating profit for the group increased by 19.6% to R1 062m as the business
benefited from improved efficiencies and stringent cost control.
Operational review
Woolworths
Retail
Net profit before tax in the Woolworths operating group retail segment grew
30.1% to R715.6m.
Clothing and Home recorded sales growth of 12.0% (9.0% in comparable stores).
The second half of the year saw an encouraging volume growth, attributable to
improved customer confidence and better values.
Womenswear had an excellent year, gaining market share as the market responded
well to our improved offer. Menswear and Childrenswear had a disappointing year
and are currently being repositioned to follow the lessons learnt in womenswear.
Sales volumes in Home improved substantially in the second half as we introduced
new ranges at more competitive prices and an improved store environment.
Foods performed exceptionally well with sales growing by 19.2% (7.8% in
comparable stores). Despite the drop in food inflation in the second half of the
year, sales in this period exceeded the 17.7% growth achieved in the first half
of the year.
A further gain in market share from 7.0% to 7.4% confirms "the good food
strategy" of consistently offering customers exceptional quality and
convenience, resulting in more customers doing their main shop at Woolworths.
Trading space continued to increase with the opening of more convenience stores.
Financial services
Substantial growth of 30.2% in our in-store card, credit card, and personal loan
books was countered by an 8.0% reduction in the usury rate over the period,
resulting in a decline in net profit before tax from R215.2m to R212.3m.
Customers are increasing their use of their Woolworths cards whilst bad debt
continues to be well managed, representing 1.7% of advances
(2003: 2.0%).
COUNTRY ROAD
Country Road achieved a small profit before tax of A$2.5m. The repositioning of
Country Road which commenced in July with a new brand presentation and better,
more customer-focused ranges should start to show benefits.
Prospects
The retail environment continues to experience solid growth on the back of lower
interest rates and inflation. Consumer spending is expected to remain strong
well into the year.
In Woolworths the repositioning in Menswear and Childrenswear, growth in
Ladieswear, Home and Foods and a drive to grow the Woolworths card book should
result in further real sales growth in the next year. In addition focus on
supply chain efficiencies and expense control will continue. The diversity of
our portfolio is beginning to deliver a less cyclical element to our earnings.
As announced in our trading update on 13 July 2004, the group has embarked on a
process to evaluate alternatives in order to optimise its financial services
balance sheet structure. In the event of such a restructure the board will
consider how it wishes to dispose of surplus funds which may result from this
process.
The board expects to continue to deliver real growth to our shareholders in the
year ahead.
DA Hawton
Chairman
SN Susman
Chief executive officer
Cape Town, 19 August 2004
Cash distribution
Notice is hereby given that the directors have declared a cash distribution of
25.5 cents per share, in lieu of an ordinary final dividend, for the year ended
30 June 2004. The payment will be made by way of a reduction in the share
premium account and in terms of the general authority to make payments to
shareholders, granted at the annual general meeting held in November 2003.
Shareholders are advised that the last day to trade in order to participate in
the cash distribution will be on Friday, 3 September 2004. The shares will trade
"ex" the distribution from commencement of business on Monday, 6 September 2004
and the record date will be Friday, 10 September 2004. The distribution will be
payable on Monday, 13 September 2004.
Share certificates may not be dematerialised or rematerialised between Monday, 6
September 2004 and Friday, 10 September 2004, both days inclusive.
CL Lowe
Group company secretary
Cape Town, 19 August 2004
DIRECTORATE AND STATUTORY INFORMATION
Non-executive directors: Buddy Hawton (Chairman), Mair Barnes (British), Nigel
Colne (British), Nolitha Fakude, Brian Frost, Mike Leeming, Chris Nissen, Sindi
Zilwa
Executive directors: Simon Susman (CEO), Richard Inskip, Norman Thomson
Group company secretary: Cherrie Lowe
Registered address (postal and physical): PO Box 680, Cape Town 8000
Woolworths House, 93 Longmarket Street, Cape Town 8001.
Registration number: 1929/001986/06
Auditors: Ernst & Young and SAB & T Inc
Bankers: Standard Bank of South Africa Limited
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001
visit our investor relations site: www.woolworthsholdings.co.za
Date: 19/08/2004 08:00:09 AM Supplied by www.sharenet.co.za
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