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WOOLWORTHS HOLDINGS LIMITED - UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2004
WOOLWORTHS HOLDINGS LIMITED
Share code: WHL ISIN: ZAE000028288
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004
highlights
Revenue up 13.9%
Operating profit up 16.0%
HEPS up 16.2%
Distribution per share up 42.3%
Financial services assets grew by 31.2%
Foods" market share continued to grow
Country Road progress continued
INCOME STATEMENT
Year ended 26 Weeks ended
30 June 2004 December
(audited) 2004 2003 %
R million Note R million R million Change
11 281.7 Revenue 6 353.1 5 579.7 13.9%
10 648.8 Turnover 6 016.6 5 266.0 14.3%
7 262.2 Cost of merchandise 4 139.4 3 574.6 15.8%
3 386.6 Gross profit 1 877.2 1 691.4 11.0%
632.9 Other revenue 336.5 313.7 7.3%
2 957.7 Expenses 1 575.8 1 455.1 8.3%
232.8 Depreciation 127.1 118.3 7.4%
544.4 Occupancy cost 285.6 268.3 6.4%
1 303.2 Employment cost 700.6 620.4 12.9%
877.3 Other operating cost 462.5 448.1 3.2%
1 061.8 Operating profit 637.9 550.0 16.0%
108.7 Interest paid 62.0 58.1 6.7%
Net profit before
953.1 exceptional items 575.9 491.9 17.1%
(16.4) Exceptional items 2 - (5.0)
936.7 Net profit before tax 575.9 486.9 18.3%
268.9 Tax 3 168.4 146.0 15.3%
667.8 Net profit after tax 407.5 340.9 19.5%
Outside shareholders"
(1.0) interest (0.9) (0.3)
Net profit attributable
666.8 to ordinary shareholders 406.6 340.6 19.4%
Reconciliation of
headline earnings
666.8 Attributable earnings 406.6 340.6 19.4%
10.1 Goodwill amortisation - 5.0
(Profit)/loss on disposal
of property, plant and
equipment net of outside
0.1 shareholders" interest (0.6) (1.1)
677.0 Headline earnings 406.0 344.5 17.9%
Headline earnings per
78.6 share (cents) 46.7 40.2 16.2%
77.4 Earnings per share (cents) 46.8 39.7 17.9%
Diluted earnings per
75.3 share (cents) 4 45.0 38.5 16.9%
Distributions per
38.5 share (cents) 18.5 13.0 42.3%
Distribution cover
(based on earnings
2.0 per share) 2.5 3.1
Number of shares in issue
868.3 (millions) 870.7 864.1 0.8%
Weighted average number
of shares in
861.2 issue (millions) 869.7 856.9 1.5%
GROUP ANALYSIS
Revenue
10 648.8 Turnover 6 016.6 5 266.0 14.3%
9 715.4 Woolworths 5 546.0 4 789.6 15.8%
4 792.2 - Clothing and home 2 685.5 2 422.9 10.8%
4 747.1 - Foods 2 753.1 2 282.0 20.6%
- Logistics services
176.1 and other 107.4 84.7 26.8%
933.4 Country Road 470.6 476.4 (1.2%)
543.4 Interest 288.6 270.7 6.6%
89.5 Other revenue 47.9 43.0 11.4%
11 281.7 6 353.1 5 579.7 13.9%
Operating profit
1 048.4 Woolworths 628.5 545.1 15.3%
13.4 Country Road 9.4 4.9 91.8%
1 061.8 637.9 550.0 16.0%
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS" INTEREST
Year ended 26 Weeks ended
30 June 2004 December
(audited) 2004 2003
R million R million R million
Ordinary shareholders" interest at
2 412.4 the beginning of the period 2 850.8 2 412.4
Movements for the period:
Share premium arising from shares
54.5 issued under share purchase scheme 46.4 40.6
383.9 Recognised gains and losses 175.2 194.9
406.2 Distributable reserves 180.0 187.9
Net profit attributable to ordinary
666.8 shareholders 406.6 340.6
(271.7) Distributions to shareholders (221.8) (159.2)
Net fair value adjustments on
11.1 financial instruments (4.8) 6.5
Non-distributable reserves
Exchange differences on translation
(22.3) of foreign entities (4.8) 7.0
Ordinary shareholders" interest at
2 850.8 the end of the period 3 072.4 2 647.9
BALANCE SHEET
As at As at
30 June 2004 December
(audited) 2004 2003
R million R million R million
ASSETS
1 757.7 Non-current assets 1 824.7 1 560.2
1 192.4 Property, plant and equipment 1 259.8 1 145.1
18.6 Investments 24.2 18.8
162.5 Loans to customers 187.5 200.5
Participation in export
171.6 partnerships 164.4 177.8
- Goodwill - 5.0
143.9 Other loans 164.7 134.4
68.7 Deferred tax 24.1 19.5
3 992.3 Current assets 4 715.7 3 235.3
576.4 Inventories 801.4 684.9
2 148.2 Woolworths card debtors 2 422.9 1 901.3
178.7 Credit card receivables 233.7 131.5
485.4 Accounts receivable 604.7 529.8
415.6 Loans to customers 482.1 301.4
188.0 Cash 170.9 201.1
5 750.0 Total assets 6 540.4 5 451.1
EQUITY AND LIABILITIES
2 873.2 Capital and reserves 3 095.3 2 672.0
2 850.8 Ordinary shareholders" interest 3 072.4 2 647.9
22.4 Outside shareholders" interest 22.9 24.1
337.8 Non-current liabilities 797.9 289.1
- Interest-bearing borrowings 500.0 -
151.2 Post-retirement medical-aid liability 162.2 140.0
186.6 Deferred tax 135.7 149.1
2 539.0 Current liabilities 2 647.2 2 490.0
1 287.5 Accounts payable 1 523.3 1 396.6
113.6 Provisions 95.2 112.7
1 137.9 Interest-bearing borrowings 1 028.7 980.7
5 750.0 Total equity and liabilities 6 540.4 5 451.1
328.3 Net asset book value - per share (cents) 352.9 306.4
GROUP ANALYSIS
5 750.0 Total assets 6 540.4 5 451.1
5 429.4 Woolworths 6 172.5 5 093.0
320.6 Country Road 367.9 358.1
576.4 Inventories 801.4 684.9
472.6 Woolworths 705.4 557.9
103.8 Country Road 96.0 127.0
Approved commitments for capital
298.5 expenditure 141.6 250.0
259.1 Woolworths 127.5 233.1
39.4 Country Road 14.1 16.9
CASH FLOW STATEMENT
Year ended 26 Weeks ended
30 June 2004 December
(audited) 2004 2003
R million R million R million
Cash flow from operating activities
794.4 Cash inflow from trading 494.8 460.2
(7.5) Working capital movements (118.1) (67.5)
(709.8) Cash applied to financial services assets (456.4) (341.6)
Cash (utilised)/generated by operating
77.1 activities (79.7) 51.1
540.9 Interest received 287.5 270.5
(105.8) Interest paid (62.0) (58.1)
(331.5) Tax paid (170.3) (175.4)
180.7 Cash (utilised)/generated by operations (24.5) 88.1
(271.7) Distributions to shareholders (221.8) (159.2)
(91.0) Net cash outflow from operating activities (246.3) (71.1)
(393.2) Cash outflow from investing activities (207.2) (235.7)
Cash flow from financing activities
- Term borrowings raised 500.0 -
54.5 Shares issued 46.4 40.6
54.5 Net cash inflow from financing activities 546.4 40.6
Increase/(decrease) in cash and
(429.7) cash equivalents 92.9 (266.2)
Cash and cash equivalents at the
(514.7) beginning of the period (949.9) (514.7)
(5.5) Effect of foreign exchange rate changes (0.8) 1.3
Cash and cash equivalents at the end
(949.9) of the period (857.8) (779.6)
GROUP ANALYSIS
794.4 Cash inflow from trading 494.8 460.2
746.2 Woolworths 468.6 438.8
48.2 Country Road 26.2 21.4
SEGMENTAL ANALYSIS
Year ended 26 Weeks ended
30 June 2004 December
(audited) 2004 2003 %
R million R million R million Change
Revenue
Retail
9 751.2 Woolworths 5 559.1 4 805.4 15.7%
948.6 Country Road 474.4 482.7 (1.7%)
647.3 Financial services 354.3 323.5 9.5%
(65.4) Intragroup (34.7) (31.9)
11 281.7 Total group 6 353.1 5 579.7 13.9%
Net profit before tax
Retail
715.6 Woolworths 456.3 386.6 18.0%
8.8 Country Road 7.5 2.8 167.9%
212.3 Financial services 112.1 97.5 15.0%
936.7 Total group 575.9 486.9 18.3%
Capital and reserves
Retail
911.8 Woolworths 1 122.2 913.0 22.9%
186.8 Country Road 188.3 200.7 (6.2%)
1 774.6 Financial services 1 784.8 1 558.3 14.5%
2 873.2 Total group 3 095.3 2 672.0 15.8%
Return on Equity
% % %
Retail
61.1 Woolworths 62.9 64.4
4.8 Country Road 9.1 3.3
9.3 Financial services 8.9 9.0
25.7 Total group 27.4 27.2
NOTES
1. The interim financial statements comply with AC 127 of South African
Statements of Generally Accepted Accounting Practice. Accounting policies used
are consistent with those applicable for the June 2004 financial statements.
The format of the cash flow statement has been revised to present gross cash
applied to financial services assets as a separate line item under operating
activities. The net movement in financial services assets of R313.7m in the six
months ended December 2003 was disclosed, this has now been split into gross
cash applied to financial services assets of R341.6m and the movement in
provisions relating to financial services assets of R27.9m is now included in
cash inflow from trading.
2. Exceptional items
Year ended 26 Weeks ended
30 June 2004 December
(audited) 2004 2003
R million R million R million
10.1 Goodwill amortisation - 5.0
Provision for onerous
6.3 lease commitment - -
16.4 - 5.0
3. The effective tax rate of 29.2% (2003: 30.0%) 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. Country Road"s operating profit is A$2.0m (2003: A$1.0m).
6. Unutilised banking facilities amount to R1 391.9m (2003: R1 149.8m). In terms
of the Articles of Association, there is no limit on the group"s authority to
raise interest-bearing debt.
7. The South African Revenue Service (SARS) has been conducting an investigation
into the tax treatment by certain other companies participating in similar
export partnerships with financial periods ending on or after 1 March 1996. The
SARS has concluded an agreement with the managing partner and its export
partners to terminate its investigation provided the partners accelerate the
payment of the taxation attributable to the participation in the partnership.
Subsequent to the balance sheet date, the group approved the settlement
arrangement. There will be no impact on the income statement as a deferred tax
liability was raised for the payment at inception of the partnership.
The group"s deferred tax liability at the end of the period in respect of its
participation in the partnerships under investigation was R156m (2003: R170m).
COMMENTARY
Group Results
Headline earnings per share for the six months to December 2004 increased from
40.2 cents per share to 46.7 cents per share. A distribution from share premium,
in lieu of a dividend, of 18.5 cents per share has been declared, representing
an interim cover of 2.5 times earnings.
Trading Environment
Buoyant trading conditions in South Africa continued throughout the first six
months of this financial year as a result of continued low inflation, lower
interest rates and ongoing growth in spending of the emerging middle income
consumers.
The Australian market was not quite as buoyant and consumer spending slowed
slightly.
Financial Review
Group turnover increased by 14.3% to R6.0bn fuelled by excellent growth in our
Foods business.
The group"s gross profit percentage declined from 32.1% to 31.2% due to the
larger contribution from our Foods business and franchise operations, and a
lower margin in Childrenswear.
Operating profit for the group increased by 16.0% to R637.9m as the business
benefited from improved efficiencies and good cost control.
OPERATIONAL REVIEW
Woolworths
Retail
Net profit before tax in the Woolworths operating group retail segment grew by
18.0% to R456.3m.
Clothing and Home sales grew by 10.8% (local growth was 13%) on the same period
last year and by 8.4% in comparable stores. Solid volume growth was achieved
with average inflation less than 1% for the period and negative by Christmas.
This performance was below the market and although our clothing is not as
cyclical as the market, this division has been underperforming. Our focus in
returning to quality differentiation, improved range structuring and more
competitive pricing through better buying and selected offshore sourcing should
deliver significant growth in the future. Our Homeware business continued to
grow well over the period despite a very competitive environment.
Our Foods division, continued to gain market share. Sales grew by 20.6% in total
and by 12.8% in comparable stores. Good volume growth was achieved with average
food inflation for the period of 3.3%. Our focus on high-quality innovative
offerings, a broader range and convenient locations drove higher like-for-like
sales and attracted new customers.
During the period we opened five full line stores, five Foods stores, two
Clothing only stores and four franchise stores. We have now modernised 40% of
our chain.
Franchise stores within South Africa performed well, however, the international
franchise business continued to be negatively affected by the strong rand.
Financial Services
Our strategy to substantially grow our in-store card, credit card and personal
loan books resulted in growth of 31.2%, the benefits of which were partially
countered by the reduction in the usury rate over the period. Nevertheless net
profit before tax increased by 15.0% to R112.1m. Debtors continued to be well
managed with net bad debts representing 1.6% of advances.
Country Road
The profit achieved in Country Road continued to reflect the benefit of the
strategies that have been put into place. Despite significant rationalisation in
the wholesale business, wholesale sales almost equalled previous levels. Volumes
in retail grew by 18% driven by materially lower prices with no compromise in
quality. This reinforced a key point of the strategy to make this business more
accessible to a broader base of customers.
Prospects
Based on expectations that inflation and interest rates will remain at current
low levels, consumer spending is expected to remain strong. We expect growth in
earnings to shareholders for the second half of the year.
Update on securitisation and share repurchase
The securitisation of the Woolworths card debtors" book should be completed by
25 February 2005. As previously reported the share repurchase will, subject to
approval by shareholders on 4 March 2005 and sanction by the court on 14 March
2005, be operative on 29 March 2005.
On behalf of the Board of Directors.
DA Hawton
Chairman
SN Susman
Chief executive officer
Cape Town, 17 February 2005
Cash Distribution
Notice is hereby given that the directors declared a cash distribution of 18.5
cents per share, in lieu of an interim dividend, for the six months ended 31
December 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 2004.
Shareholders are advised that the last day to trade in order to participate in
the cash distribution will be on 4 March 2005. The shares will trade "ex" the
distribution from commencement of business on 7 March 2005 and the record date
will be 11 March 2005. The distribution will be payable on 14 March 2005.
Share certificates may not be dematerialised or rematerialised between
7 March 2005 and 11 March 2005, both days inclusive.
CL Lowe
Group secretary
Cape Town, 17 February 2005
visit our investor relations site www.woolworthsholdings.co.za
directorate and statutory information
Non-executive directors: DA Hawton (Chairman), M Barnes (British), NL Colne
(British), NV Fakude, BJ Frost, MJ Leeming, AC Nissen, SV Zilwa
Executive directors: SN Susman (CEO), RJD Inskip, NW Thomson
Group secretary: CL Lowe
Woolworths Holdings Limited: Company Registration Number 1929/001986/06
Registered office (postal and physical): PO Box 680, Cape Town 8000;
93 Longmarket Street, Cape Town 8001
Share code: WHL ISIN: ZAE000028288
Auditors: Ernst & Young and SAB & T Inc
Bankers: Standard Bank of South Africa Limited
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd,
70 Marshall Street, Johannesburg 2001
Date: 17/02/2005 08:30:28 AM Supplied by www.sharenet.co.za
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