Wrap Text
WHL - Woolworths Holdings - Unaudited group results for the and dividend
declaration
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")
Unaudited group results for the twenty six weeks ended December 2006
Another year of continued good growth
Highlights
- Revenue 21.0% up
- Operating profit 31.1% up
- Earnings per share 32.3% up
- Diluted HEPS 22.9% up
- Dividend per share 22.9% up
Income statement
26 weeks ended
December
2006 2005 %
Notes Rm Rm change
Revenue 8 970.4 7 415.3 21.0%
Turnover 8 406.5 6 995.0 20.2%
Cost of sales 5 522.8 4 604.6 19.9%
Gross profit 2 883.7 2 390.4 20.6%
Other revenue 563.9 420.3 34.2%
Expenses 2 490.0 2 080.4 19.7%
Depreciation 155.5 132.9 17.0%
Occupancy cost 398.9 337.2 18.3%
Employment cost 954.0 805.1 18.5%
Other operating cost 981.6 805.2 21.9%
Operating profit 957.6 730.3 31.1%
Finance costs 171.9 113.8 51.1%
Profit before exceptional item 785.7 616.5 27.4%
Exceptional item 5 54.6 -
Profit before tax 840.3 616.5 36.3%
Tax 6 273.1 194.2 40.6%
Profit after tax 567.2 422.3 34.3%
Attributable to:
Ordinary shareholders 563.6 421.3 33.8%
Minority shareholders 3.6 1.0 >100%
Reconciliation of headline earnings
Attributable earnings 563.6 421.3 33.8%
Profit on disposal of property, plant
and equipment -
net of minority shareholders` interest (47.9) (2.2)
Foreign exchange loss realised on
repayment of loan
by subsidiary 1.9 -
Headline earnings 517.6 419.1 23.5%
Headline earnings per share (cents) 64.8 53.1 22.0%
Earnings per share (cents) 7 70.5 53.3 32.3%
Diluted headline earnings per
share (cents) 63.8 51.9 22.9%
Diluted earnings per share (cents) 7 69.3 52.2 32.8%
Distribution per share (cents) 29.5 24.0 22.9%
Distribution cover (based on headline
earnings per share) 2.2 2.2
Number of shares in issue (millions) 800.4 796.2 0.5%
Weighted average number of shares
in issue (millions) 799.2 789.8 1.2%
Revenue
Turnover 8 406.5 6 995.0 20.2%
Woolworths 7 810.1 6 488.9 20.4%
- Clothing and home 3 460.2 3 024.4 14.4%
- Food 4 191.3 3 329.1 25.9%
- Logistics services and other 158.6 135.4 17.1%
Country Road 596.4 506.1 17.8%
Interest 448.7 348.6 28.7%
Other revenue 115.2 71.7 60.7%
8 970.4 7 415.3 21.0%
Operating profit
Woolworths 926.4 720.1 28.6%
Country Road 31.2 10.2 >100%
957.6 730.3 31.1%
Year ended
30 June 2006
Rm
Revenue 15 143.0
Turnover 14 208.0
Cost of sales 9 340.4
Gross profit 4 867.6
Other revenue 935.0
Expenses 4 312.3
Depreciation 269.9
Occupancy cost 679.1
Employment cost 1 699.6
Other operating cost 1 663.7
Operating profit 1 490.3
Finance costs 243.9
Profit before exceptional item 1 246.4
Exceptional item -
Profit before tax 1 246.4
Tax 409.0
Profit after tax 837.4
Attributable to:
Ordinary shareholders 835.6
Minority shareholders 1.8
Reconciliation of headline earnings
Attributable earnings 835.6
Profit on disposal of property, plant
and equipment -
net of minority shareholders` interest (0.6)
Foreign exchange loss realised on
repayment of loan
by subsidiary -
Headline earnings 835.0
Headline earnings per share (cents) 105.0
Earnings per share (cents) 105.1
Diluted headline earnings per 103.0
share (cents)
Diluted earnings per share (cents) 103.1
Distribution per share (cents) 63.0
Distribution cover (based on headline 1.7
earnings per share)
Number of shares in issue (millions) 797.2
Weighted average number of shares 795.3
in issue (millions)
Revenue
Turnover 14 208.0
Woolworths 13 227.3
- Clothing and home 6 012.2
- Food 6 941.5
- Logistics services and other 273.6
Country Road 980.7
Interest 763.6
Other revenue 171.4
15 143.0
Operating profit
Woolworths 1 471.3
Country Road 19.0
1 490.3
statement of changes in equity
Year ended
30 June 2006
Rm
Shareholders` interest at the
beginning of the period 2 210.9
Movements for the period:
Issue of shares 72.7
Share repurchase (61.7)
Recognised gains and losses 412.3
Distributable reserves 412.6
Profit for the period 837.4
Distributions to shareholders (474.2)
Net fair value adjustments
on financial
instruments 32.2
Share-based payments 18.0
Acquisition of former investment (0.8)
Non-distributable reserves
Exchange differences on
translation of
foreign operations (0.3)
Shareholders` interest at the
end of the period 2 634.2
Ordinary Minority
shareholders` shareholders`
interest interest
Rm Rm
Shareholders` interest at the
beginning of the period 2 606.3 27.9
Movements for the period:
Issue of shares 40.8 -
Share repurchase - -
Recognised gains and losses 261.1 4.1
Distributable reserves 253.3 3.9
Profit for the period 563.6 3.6
Distributions to shareholders (312.1) -
Net fair value adjustments
on financial
instruments (10.4) 0.3
Share-based payments 12.2 -
Acquisition of former investment - -
Non-distributable reserves
Exchange differences on
translation of
foreign operations 7.8 0.2
Shareholders` interest at the
end of the period 2 908.2 32.0
26 weeks ended
December
Total Total
2006 2005
Rm Rm
Shareholders` interest at the
beginning of the period 2 634.2 2 210.9
Movements for the period:
Issue of shares 40.8 48.3
Share repurchase - -
Recognised gains and losses 265.2 84.1
Distributable reserves 257.2 135.9
Profit for the period 567.2 422.3
Distributions to shareholders (312.1) (282.3)
Net fair value adjustments
on financial
instruments (10.1) (12.2)
Share-based payments 12.2 8.1
Acquisition of former investment - -
Non-distributable reserves
Exchange differences on
translation of
foreign operations 8.0 (51.8)
Shareholders` interest at the
end of the period 2 940.2 2 343.3
Cash flow statement
26 weeks ended
December
2006 2005
Rm Rm
Cash flow from operating activities
Cash inflow from trading 760.8 515.1
Working capital movements (44.3) 90.0
Cash applied to financial services assets (576.5) (336.7)
Cash generated by operating activities 140.0 268.4
Interest received 448.1 348.6
Finance costs paid (160.9) (115.7)
Tax paid (233.2) (228.9)
Cash generated by operations 194.0 272.4
Distributions to shareholders (312.1) (282.3)
Net cash outflow from operating activities (118.1) (9.9)
Cash outflow from investing activities (332.6) (254.4)
Cash flow from financing activities
Shares issued 40.6 48.3
Shares repurchased - -
Net cash inflow from financing activities 40.6 48.3
Decrease in cash and cash equivalents (410.1) (216.0)
Cash and cash equivalents at the beginning
of the period (623.4) 23.3
Effect of foreign exchange rate changes 1.0 (7.3)
Cash and cash equivalents at the end
of the period (1 032.5) (200.0)
GROUP ANALYSIS
Cash inflow from trading 760.8 515.1
Woolworths 710.3 506.9
Country Road 50.5 8.2
Gross capital expenditure 409.3 292.7
Woolworths 383.1 258.6
Country Road 26.2 34.1
Year ended
30 June 2006
Rm
Cash flow from operating activities
Cash inflow from trading 1 072.5
Working capital movements 177.4
Cash applied to financial services assets (882.2)
Cash generated by operating activities 367.7
Interest received 762.1
Finance costs paid (244.6)
Tax paid (475.4)
Cash generated by operations 409.8
Distributions to shareholders (474.2)
Net cash outflow from operating activities (64.4)
Cash outflow from investing activities (600.3)
Cash flow from financing activities
Shares issued 72.7
Shares repurchased (61.7)
Net cash inflow from financing activities 11.0
Decrease in cash and cash equivalents (653.7)
Cash and cash equivalents at the beginning 23.3
of the period
Effect of foreign exchange rate changes 7.0
Cash and cash equivalents at the end (623.4)
of the period
GROUP ANALYSIS
Cash inflow from trading 1 072.5
Woolworths 1 019.0
Country Road 53.5
Gross capital expenditure 637.9
Woolworths 599.8
Country Road 38.1
Balance sheet
As at December
2006 2005
Rm Rm
ASSETS
Non-current assets 2 778.0 2 190.9
Property, plant and equipment 1 801.5 1 421.2
Investment property 109.0 72.2
Investments - 2.6
Loans to customers 271.6 228.6
Participation in export partnerships 71.2 62.4
Goodwill 23.0 -
Other loans 216.1 191.7
Deferred tax 285.6 212.2
Current assets 7 443.0 5 808.4
Inventories 1 175.1 865.7
Woolworths card debtors 3 269.6 2 788.7
Credit card receivables 752.1 405.5
Accounts receivable 911.9 851.0
Loans to customers 698.4 587.8
Tax 28.8 26.9
Cash 607.1 282.8
Total assets 10 221.0 7 999.3
EQUITY AND LIABILITIES
Capital and reserves 2 940.2 2 343.3
Ordinary shareholders` interest 2 908.2 2 316.2
Minority shareholders` interest 32.0 27.1
Non-current liabilities 2 353.3 3 075.1
Interest bearing borrowings 1 600.0 2 400.0
Operating lease accrual 433.3 404.8
Post-retirement medical aid liability 214.3 193.2
Deferred tax 105.7 77.1
Current liabilities 4 927.5 2 580.9
Accounts payable 2 015.5 1 734.0
Provisions 138.7 105.5
Tax 334.6 258.6
Interest bearing borrowings 2 438.7 482.8
Total equity and liabilities 10 221.0 7 999.3
Net asset book value per share (cents) 363.3 290.0
GROUP ANALYSIS
Total assets 10 221.0 7 999.3
Woolworths 9 808.0 7 610.5
Country Road 413.0 388.8
Inventories 1 175.1 865.7
Woolworths 1 054.1 711.0
Country Road 121.0 154.7
Approved commitment for capital expenditure 340.2 448.8
Woolworths 320.4 442.0
Country Road 19.8 6.8
As at
30 June 2006
Rm
ASSETS
Non-current assets 2 490.6
Property, plant and equipment 1 597.7
Investment property 109.0
Investments -
Loans to customers 249.2
Participation in export partnerships 71.6
Goodwill 23.0
Other loans 184.2
Deferred tax 255.9
Current assets 6 277.7
Inventories 841.4
Woolworths card debtors 2 971.2
Credit card receivables 593.7
Accounts receivable 815.8
Loans to customers 640.9
Tax 4.5
Cash 410.2
Total assets 8 768.3
EQUITY AND LIABILITIES
Capital and reserves 2 634.2
Ordinary shareholders` interest 2 606.3
Minority shareholders` interest 27.9
Non-current liabilities 2 801.0
Interest bearing borrowings 2 100.0
Operating lease accrual 420.2
Post-retirement medical aid liability 202.7
Deferred tax 78.1
Current liabilities 3 333.1
Accounts payable 1 604.1
Provisions 131.0
Tax 264.4
Interest bearing borrowings 1 333.6
Total equity and liabilities 8 768.3
Net asset book value per share (cents) 326.9
GROUP ANALYSIS
Total assets 8 768.3
Woolworths 8 368.1
Country Road 400.2
Inventories 841.4
Woolworths 707.9
Country Road 133.5
Approved commitment for capital expenditure 419.5
Woolworths 366.2
Country Road 53.3
Segmental analysis
26 weeks ended
December
2006 2005 %
Rm Rm change
Revenue
Retail
Woolworths 7 845.8 6 511.2 20.5%
Country Road 601.0 510.8 17.7%
Financial Services 570.5 430.0 32.7%
Intragroup (46.9) (36.7)
Total group 8 970.4 7 415.3 21.0%
Profit before tax
Retail
Woolworths 735.5 532.7 38.1%
Country Road 31.2 8.0 >100%
Financial Services 73.6 75.8 (2.9%)
Intragroup - -
Total group 840.3 616.5 36.3%
Return on equity % %
Retail
Woolworths 60.9% 72.0%
Country Road 25.1% 7.7%
Financial Services 8.9% 10.1%
Total group 37.5% 37.2%
Year ended
30 June 2006
Rm
Revenue
Retail
Woolworths 13 286.9
Country Road 993.6
Financial Services 941.4
Intragroup (78.9)
Total group 15 143.0
Profit before tax
Retail
Woolworths 1 069.1
Country Road 14.9
Financial Services 162.4
Intragroup -
Total group 1 246.4
Return on equity
Retail
Woolworths 58.6%
Country Road 6.2%
Financial Services 11.7%
Total group 34.8%
Notes
1.Basis of preparation
The interim financial statements comply with IAS 34 - Interim Financial
Reporting. These financial statements do not contain all the information
and disclosures required in the annual financial statements, and should be
read in conjunction with the group consolidated annual financial statements
as at 30 June 2006.
2.Significant accounting policies
The accounting policies applied are consistent with those followed in the
preparation of the consolidated annual financial statements for the year
ended 30 June 2006, except for the adoption of the following IFRS, IFRIC
interpretations and amendments that became effective during the current
period and had no impact on the reported results:
- IFRIC 4 Determining whether an Arrangement Contains a Lease;
- IFRIC 8 Scope of IFRS 2;
- IFRIC 9 Reassessment of Embedded Derivatives;
- AC 503 Accounting for Black Economic Empowerment (BEE) Transactions;
- IAS 19 Amendment - Employee Benefits and Actuarial Gains and Losses,
Group
Plans and Disclosures;
- IAS 39 Amendment - The Fair Value Option; and
- IAS 39 Amendment - Financial Guarantee Contracts.
3.Change in comparative period classifications
In accordance with the recommendation by SAICA regarding the treatment of
settlement discounts, the measurement of cost of sales for the period to
December 2005 has been adjusted by R105.5m representing the settlement
discounts received from suppliers in respect of merchandise purchases.
4.Seasonality of turnover
No material variations in the turnover of the group are expected to occur
between the first and second half of the financial year.
5.Exceptional item
During the interim period to December 2006, the group disposed of property
with a net book value of R27.9m. The full pre-tax profit on disposal of
R54.6m is treated as an exceptional item as the transaction is non-
recurring in nature and falls outside the scope of the group`s operational
activities.
6. Tax
The tax rate of 32.5% (2005: 31.5%) is the estimated annual effective
income tax rate of 28.1% plus Secondary Tax on Companies (STC) on the final
dividend for the year ended 30 June 2006, paid in September 2006. STC
recognised in the comparative period was lower than current STC as the
final 2005 distribution was made partially from share premium. The
estimated annual effective tax rate is less than the corporate tax rate of
29% mainly due to the capital gain on the disposal of property.
7.Earnings per share
The difference between earnings per share and diluted earnings per share is
due to outstanding options.
8.Property, plant and equipment
During the six months ended December 2006, the group acquired assets with a
cost of R409.3m (2005: R292.7m). Assets with a net book value of R19.9m
(2005: R8.5m) were disposed of by the group during the same period,
resulting in a profit of R1.8m (2005: R2.4m). This does not include the
disposal of property referred to in note 5.
9.Issue of shares
During the six months ended December 2006, 3 139 956 (2005: 8 947 408)
ordinary shares were issued in terms of the group`s share incentive scheme.
10.Financial instruments
The interest rate exposure on an additional R1 000m of existing borrowings
was hedged during the interim period to fix the interest rate at 8.71%.
This brings the total hedged borrowings to R1 950m.
11.Contingent liabilities
The holding company provides sureties for the banking facilities and lease
obligations of certain subsidiaries. In the opinion of the directors, the
possibility of loss arising therefrom is remote.
12.Borrowing facilities
Unutilised banking facilities amount to R1 168.1m (2005: R1 971.4m). In
terms of the articles of association, there is no limit on the group`s
authority to raise interest bearing debt.
13.Events subsequent to balance sheet date
The group anticipates completing a second securitised bond issue of
approximately R1 000m during the first quarter of 2007.
Commentary
Group results
Revenue for the twenty six weeks to December 2006 increased by 21.0% to R8.97bn.
Operating profit grew by 31.1% to R957.6m. Good revenue growth together with
operating efficiences brought about an improvement in operating margins from
9.8% to 10.7%. Higher borrowings utilised to fund the growth of our financial
services books and the increase in interest rates resulted in finance costs
increasing by 51.1% to R171.9m. Diluted headline earnings per share increased by
22.9% (28.5% prior to the non-comparable STC payment) from 51.9 cents to 63.8
cents per share. The pre-tax profit of R54.6m on the disposal of land in Midrand
contributed to the higher increase in earnings per share of 32.3%.
Interim dividend
An interim dividend of 29.5 cents per share has been declared representing an
increase of 22.9%.
Trading environment
Spending continued to grow driven by ongoing structural shifts in the consumer
base and the higher level of credit usage. Good trading was experienced over the
Christmas period.
Operating review
Woolworths
Retail
Our retail business traded well and achieved good like-for-like sales growth.
Clothing and home sales increased by 14.4% (2005: 12.6%), with a 9.8% (2005:
8.2%) increase in comparable stores. Inflation averaged approximately 1.6%. An
improved offer in menswear and excellent value in childrenswear delivered
particulary good results. Food continued to perform well and sales grew by 25.9%
(2005: 20.9%) in total and 15.1% (2005: 12.2%) in comparable stores. Inflation
averaged approximately 7.4%. The high growth rate was driven by the roll-out of
convenience stores, our continued quality and innovation and customers
increasingly using us for their main food shop.
Trading space
Clothing and home trading space increased 4.2%. The accelerated roll-out of food
convenience stores resulted in a 13.1% increase in food trading space from
December 2005.
Financial services
Good growth of 24.5% was experienced in our store card, credit card and personal
loan books. The net bad debt experience on the combined books was well within
expectations increasing from 4.0% to 4.1% of advances.
The fixing of the usury rate on unsecured credit continues to negatively impact
the margin in our financial services business.
Country Road
Country Road contributed a profit after tax of A$5.2m compared to A$2.3m in the
prior year. Retail sales increased by 13.7% in Australian dollar terms and total
sales by 3.5%. Wholesale sales decreased as we convert this part of the business
into a concession model in the two major departmental store chains.
Prospects
Higher interest rates and a tighter credit environment will progressively subdue
growth in the second half. Nevertheless we expect to deliver ongoing good growth
in diluted headline earnings per share for the full year.
Empowerment
Woolworths continues to be committed to black economic empowerment (BEE) and
transformation. As part of our BEE strategy the board has approved a broad-based
share scheme for staff, the majority of whom are black. This scheme will be
presented for shareholder approval at a general meeting to be convened for May
2007.
Changes to the board of directors
On 1 December 2006 Andrew Jennings was appointed to the board.
DA Hawton SN Susman
Chairman Chief executive officer
Cape Town, 14 February 2007
Dividend payment
Notice is hereby given that the directors have declared an interim dividend
of 29.5 cents per share for the six months ended December 2006.
The salient dates for the dividend will be as follows:
Last day to trade to receive dividend Friday, 2 March 2007
Shares commence trading "ex" dividend Monday, 5 March 2007
Record date Friday, 9 March 2007
Payment date Monday, 12 March 2007
Share certificates may not be dematerialised or rematerialised between
Monday, 5 March 2007 and Friday, 9 March 2007, 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, 14 February 2007
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, Andrew Jennings
(British), Zyda Rylands, Norman Thomson
Group secretary: Cherrie Lowe 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 Registered Auditors Inc 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: 15/02/2007 08:01:04 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
Sharenet Sites 
