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Woolworths Holdings - Audited group results for the year ended 30 June 2006
Woolworths Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1929/001986/06
Share code: WHL & ISIN: ZAE000063863
("Woolworths Holdings" or "the Company")
Audited group results for the year ended 30 June 2006
2006 Highlights
Revenue up 16.6%
Operating profit up 21.0%
HEPS up 17.4%
HEPS prior to non-comparable STC up 22.9%
Dividend per share up 16.7%
Return on equity up to 34.8%
COMMENTARY
Group results
The board wishes to announce another set of positive results. Headline earnings
per share for the financial year to June 2006 increased 17.4% (22.9% prior to
the non-comparable STC payment) from 89.4 cents to 105.0 cents per share and
return on equity grew to 34.8% from 31.2%. A total dividend of 63 cents per
share is declared for the year, representing a 16.7% increase from the prior
year.
Trading environment
In South Africa consumer spending remained strong, however, growth in the last
few months was slightly slower due to increasing interest rates and higher
inflation.
Financial review
Group revenue increased by 16.6% to R15.1bn.
Operating profit for the group increased by 21.0% to R1.5bn and the operating
margin improved from 9.5% to 9.8%.
The group"s gross profit margin was maintained at 34.3% despite the ongoing
change in the mix of our business. This was achieved by an increased margin in
clothing and home driven through effective sourcing and lower stock markdowns.
The share repurchase in March 2005 has resulted in an increase in borrowings
over last year and a substantial increase in finance costs. Headline earnings
per share and return on equity were enhanced as a consequence.
Operating review
Woolworths
Retail
During the year the retail divisions experienced good growth.
The implementation of significant systems enhancements affected the whole
organisation from the buying groups through to our stores. Further, our clothing
and home division was restructured supporting the strategy of providing
consistent taste and a more differentiated product.
Clothing and home grew sales by 12.4% in total and 8.2% in comparable stores,
with an average deflation rate of approximately 1%. Despite the shortage of core
product throughout winter, like-for-like volume growth was still strong.
Food continued to perform well and sales grew by 22.5% in total and 11.9% in
comparable stores, with an average inflation rate of approximately 4.2%. Market
share increased from 8.0% to 8.5%. Growth is being driven by the ongoing rollout
of convenience stores, our innovative offering and improved value.
Trading space
We expanded our trading space by 6.4% in clothing and home and 14.4% in food
over the period.
Financial services
Good growth was experienced in our in-store card, credit card and personal loan
books of 22.3% for the year to June 2006. The net bad debt experience on the
combined books increased from 2.4% to 2.9% of advances due to a tougher credit
environment, the planned rise in store card debt and some system implementation
challenges.
Country Road
Retail sales were 8.2% higher in Australian dollar terms with comparable store
growth of 7.3%. Country Road is changing its wholesale business to a concession
model which will give it full price and range responsibility.
Total sales decreased by 1.7% in Australian dollar terms, due to a decline in
wholesale sales given the planned transition to concession.
Prospects
We expect the growth in consumer demand to be more moderate and the credit
environment to continue to tighten. Our earnings will be negatively affected by
the possible implementation of quotas on goods from China as well as the recent
decision to fix the usury rate charged on unsecured credit until 1 July 2007.
Empowerment
As a key part of our broad based black economic empowerment strategy, we are
finalising our plans for a broad based share scheme for employees, the majority
of whom are black. This scheme will be presented to shareholders for approval at
a general meeting to be held this financial year.
Changes to the board of directors
On 22 August 2006 Peter Bacon and Zyda Rylands, the People director of
Woolworths (Proprietary) Limited, were appointed to the board.
DA Hawton SN Susman
Chairman Chief executive officer
Cape Town, 23 August 2006
Dividend payment
Notice is hereby given that the directors have declared a final dividend of 39.0
cents per share for the six months ended 30 June 2006.
The salient dates for the dividend will be as follows:
Last day to trade to receive dividend Friday, 8 September 2006
Shares commence trading "ex" dividend Monday, 11 September 2006
Record date Friday, 15 September 2006
Payment date Monday, 18 September 2006
Share certificates may not be dematerialised or rematerialised between Monday,
11 September 2006 and Friday, 15 September 2006, both days inclusive.
In accordance with the company"s articles of association, dividends amounting to
less than R5.00 due to any one holder of the company"s shares held in
certificated form will not be paid, unless otherwise requested in writing, but
will be aggregated with other such amounts and be donated to a charity nominated
by the directors.
CL Lowe
Group secretary Cape Town, 23 August 2006
Directorate and statutory information
Non-executive directors: Buddy Hawton (Chairman), Peter Bacon, Mair Barnes
(British), Nigel Colne (British), Brian Frost, Mike Leeming, Chris Nissen, Sindi
Zilwa
Executive directors: Simon Susman (CEO), Richard Inskip, Zyda Rylands, Norman
Thomson
Group secretary: Cherrie Lowe
Woolworths Holdings Limited
Share code: WHL ISIN: ZAE000063863
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
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001
Visit our investor relations site: www.woolworthsholdings.co.za
Income statement
Year ended 30 June Restated
2006 2005 %
Note Rm Rm change
Revenue 15 143.0 12 988.9 16.6%
Turnover 14 208.0 12 220.7 16.3%
Cost of sales 9 340.4 8 027.1 16.4%
Gross profit 4 867.6 4 193.6 16.1%
Other revenue 935.0 768.2 21.7%
Expenses 4 312.3 3 730.5 15.6%
Depreciation 269.9 254.5 6.1%
Occupancy cost 679.1 609.8 11.4%
Employment cost 1 699.6 1 460.0 16.4%
Other operating cost 1 663.7 1 406.2 18.3%
Operating profit 1 490.3 1 231.3 21.0%
Finance costs 243.9 152.7 59.7%
Profit before tax 1 246.4 1 078.6 15.6%
Tax 3 409.0 299.5 36.6%
Profit after tax 837.4 779.1 7.5%
Attributable to:
Ordinary shareholders 835.6 776.9 7.6%
Minority shareholders 1.8 2.2 (18.2%)
Reconciliation of
headline earnings
Attributable earnings 835.6 776.9 7.6%
(Profit)/loss on disposal
of property, plant and
equipment net of minority
shareholders" interest (0.6) 0.9
Profit on disposal of
investment in unit trust - (7.9)
Reversal of provision for
impairment of property - (15.5)
Provision for impairment
of plant and equipment - 0.5
Foreign exchange loss
realised on repayment
of loan by subsidiary - 4.1
Headline earnings 835.0 759.0 10.0%
Headline earnings
per share (cents) 105.0 89.4 17.4%
Earnings per
share (cents) 105.1 91.5 14.9%
Diluted headline
earnings per share (cents) 103.0 87.3 18.0%
Diluted earnings
per share (cents) 103.1 89.4 15.3%
Distributions per share (cents) 63.0 54.0 16.7%
Distribution cover
(based on earnings per share) 1.7 1.7
Number of shares
in issue (millions) 797.2 787.2 1.3%
Weighted average number
of shares in issue (millions) 795.3 849.4 (6.4%)
GROUP ANALYSIS
Revenue
Turnover 14 208.0 12 220.7 16.3%
Woolworths 13 227.3 11 238.6 17.7%
- Clothing and home 6 012.2 5 349.5 12.4%
- Food 6 941.5 5 666.0 22.5%
- Logistics services and other 273.6 223.1 22.6%
Country Road 980.7 982.1 (0.1%)
Interest 763.6 641.7 19.0%
Other revenue 171.4 126.5 35.5%
15 143.0 12 988.9 16.6%
Operating profit
Woolworths 1 471.3 1 206.9 21.9%
Country Road 19.0 24.4 (22.1%)
1 490.3 1 231.3 21.0%
Balance sheet
At 30 June
Restated
2006 2005
Rm Rm
ASSETS
Non-current assets 2 490.6 2 002.0
Property, plant and equipment 1 597.7 1 304.0
Investment property 109.0 72.2
Investments - 2.6
Loans to customers 249.2 203.9
Participation in export partnerships 71.6 79.3
Other loans 184.2 146.9
Goodwill 23.0 -
Deferred tax 255.9 193.1
Current assets 6 277.7 5 137.1
Inventories 841.4 683.0
Woolworths card debtors 2 971.2 2 590.8
Credit card receivables 593.7 309.6
Accounts receivable 815.8 777.0
Loans to customers 640.9 539.8
Tax 4.5 11.4
Cash 410.2 225.5
Total assets 8 768.3 7 139.1
EQUITY AND LIABILITIES
Capital and reserves 2 634.2 2 210.9
Ordinary shareholders" interest 2 606.3 2 184.7
Minority shareholders" interest 27.9 26.2
Non-current liabilities 2 801.0 3 061.5
Interest bearing borrowings 2 100.0 2 400.0
Operating lease accrual 420.2 390.1
Post-retirement medical aid liability 202.7 181.3
Deferred tax 78.1 90.1
Current liabilities 3 333.1 1 866.7
Accounts payable 1 604.1 1 301.9
Provisions 131.0 117.5
Tax 264.4 245.1
Interest bearing borrowings 1 333.6 202.2
Total equity and liabilities 8 768.3 7 139.1
Net asset book value - per share (cents) 326.9 277.5
GROUP ANALYSIS
Total assets 8 768.3 7 139.1
Woolworths 8 368.1 6 754.4
Country Road 400.2 384.7
Inventories 841.4 683.0
Woolworths 707.9 563.0
Country Road 133.5 120.0
Approved commitments for capital expenditure 419.5 643.2
Woolworths 366.2 598.2
Country Road 53.3 45.0
Statement of changes in equity
Year ended 30 June Ordinary Minority Restated
shareholders" shareholders" Total Total
interest interest 2006 2005
Rm Rm Rm Rm
Shareholders"
interest
at the beginning
of the year 2 184.7 26.2 2 210.9 2 708.1
Movements for the
year:
Issue of shares 72.7 - 72.7 63.2
Share repurchase (61.7) - (61.7) (1 002.0)
Cost of capital
restructuring - - - (18.4)
Recognised gains
and losses 410.6 1.7 412.3 460.0
Distributable
reserves 410.3 2.3 412.6 418.5
Profit for the
year 835.6 1.8 837.4 779.1
Distributions to
shareholders (474.2) - (474.2) (384.2)
Net fair value
adjustments on
financial
instruments 31.7 0.5 32.2 13.2
Share-based
payments 18.0 - 18.0 10.4
Acquisition of
former investment (0.8) - (0.8) -
Non-distributable
reserves
Exchange
differences
on translation of
foreign
subsidiaries 0.3 (0.6) (0.3) 41.5
Shareholders"
interest
at the end of the
year 2 606.3 27.9 2 634.2 2 210.9
Segmental analysis
Year ended 30 June Restated
2006 2005 %
Rm Rm change
Revenue
Retail
Woolworths 13 286.9 11 288.4 17.7%
Country Road 993.6 995.1 (0.2%)
Financial services 941.4 773.9 21.6%
Intragroup (78.9) (68.5)
Total group 15 143.0 12 988.9 16.6%
Operating profit
Retail
Woolworths 1 069.2 858.7 24.5%
Country Road 19.0 24.4 (22.1%)
Financial services 402.1 348.2 15.5%
Total group 1 490.3 1 231.3 21.0%
Return on equity
% %
Retail
Woolworths 58.6 71.7
Country Road 6.2 10.3
Financial services 11.7 9.5
Total group 34.8 31.2
Cash flow statement
Year ended 30 June 2006 2005
Rm Rm
Cash flow from operating activities
Cash inflow from trading 1 072.5 996.5
Working capital movements 177.4 (228.4)
Cash applied to financial services assets (882.2) (722.0)
Cash generated by operating activities 367.7 46.1
Interest received 762.1 638.0
Finance costs paid (244.6) (149.9)
Tax paid (475.4) (314.6)
Cash generated by operations 409.8 219.6
Distributions to shareholders (474.2) (384.2)
Net cash outflow from operating activities (64.4) (164.6)
Cash outflow from investing activities (600.3) (312.6)
Cash flow from financing activities
Shares issued 72.7 63.2
Repurchase of shares (61.7) (1 002.0)
Term borrowings raised - 500.0
Notes issued - 1 900.0
Capital restructuring costs - (18.4)
Net cash inflow from financing activities 11.0 1 442.8
(Decrease)/increase in cash and cash equivalents (653.7) 965.6
Cash and cash equivalents at
the beginning of the period 23.3 (949.9)
Effect of foreign exchange rate changes 7.0 7.6
Cash and cash equivalents at the end of the period (623.4) 23.3
GROUP ANALYSIS
Cash inflow from trading 1 072.5 996.5
Woolworths 1 019.0 952.1
Country Road 53.5 44.4
Gross capital expenditure 637.9 385.9
Woolworths 599.8 344.1
Country Road 38.1 41.8
Notes
1. Basis of preparation
The financial statements are prepared in accordance with, and comply with
International Financial Reporting Standards (IFRS) and the South African
Companies Act of 1973. They are prepared on going concern and historical cost
bases as modified by the revaluation of certain financial instruments required
to be recorded at fair value.
2. Changes in accounting policies
Accounting policies used are consistent with those used in the published June
2005 annual financial statements, except for changes made as a result of the
adoption of IFRS and SAICA Circular 9/2006 regarding inventories and cost of
sales.
Revised IFRS policies have been consistently applied to both years presented.
The impact of the IFRS conversion was published in the December 2005 interim
results announcement which is available on www.woolworthsholdings.co.za.
In accordance with the recommendation by SAICA regarding the treatment of
settlement discounts, the measurement of cost of sales has been adjusted by
the settlement discounts received from suppliers in respect of merchandise
purchases, with retrospective effect.
3. The effective tax rate of 32.8% (2005: 27.8%) is higher as a result of STC on
dividends declared and paid during the financial year. The effective rate
excluding the non-comparable STC is 29.7%.
4. Audit opinion
These abridged financial statements have been extracted from the audited
financial statements on which Ernst & Young and SAB & T Inc have issued an
unqualified audit report. This report is available for inspection at the
company"s registered office.
Date: 23/08/2006 08:00:10 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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