Wrap Text
WHL - Woolworths Holdings Limited - Audited group results for the year ended 30
june 2007
Woolworths Holdings Limited
Registration number: 1929/001986/06
Share code: WHL ISIN: ZAE000063863
Audited group results for the year ended 30 June 2007
financial highlights
revenue up 23.1% to R18.6bn
operating profit up 23.8% to R1.8bn
diluted earnings per share up 27.5% to 131.5 cents
diluted HEPS up 21.8% to 125.5 cents
dividend per share up 20.6% to 76.0 cents
trading highlights
clothing and home turnover up 16.2% to R6.9bn
food turnover up 25.6% to R8.7bn
financial services revenue up 35.4% to R1.3bn
income statement
Year ended 30 June
Restated
2007 2006 %
Note Rm Rm change
Revenue 18 641.9 15 144.8 23.1
Turnover 17 376.9 14 208.0 22.3
Cost of sales 11 399.9 9 340.4 22.0
Gross profit 5 977.0 4 867.6 22.8
Other revenue 1 265.0 936.8 35.0
Expenses 5 396.5 4 314.1 25.1
Depreciation 316.7 269.9 17.3
Occupancy cost 806.0 679.1 18.7
Employment cost 2 129.3 1 701.4 25.1
Other operating cost 2 144.5 1 663.7 28.9
Operating profit 1 845.5 1 490.3 23.8
Finance costs 378.7 243.9 55.3
Profit before exceptional item 1 466.8 1 246.4 17.7
Exceptional item 3 54.6 - >100.0
Profit before tax 1 521.4 1 246.4 22.1
Tax 4 434.7 409.0 6.3
Profit after tax 1 086.7 837.4 29.8
Attributable to:
Ordinary shareholders 1 074.4 835.6 28.6
Minority shareholders 12.3 1.8 >100.0
Reconciliation of headline earnings
Attributable earnings 1 074.4 835.6 28.6
Profit on disposal of property,
plant and equipment net of minority
shareholders` interest (48.0) (0.6)
Foreign exchange profit realised
on repayment of loan by subsidiary (1.1) -
Headline earnings 1 025.3 835.0 22.8
Headline earnings per share (cents) 127.8 105.0 21.7
Earnings per share (cents) 133.9 105.1 27.4
Diluted headline earnings per
share (cents) 125.5 103.0 21.8
Diluted earnings per share (cents) 131.5 103.1 27.5
Distribution per share (cents) 76.0 63.0 20.6
Distribution cover (based on
headline earnings per share) 1.7 1.7
Number of shares in issue (millions) 809.3 797.2 1.5
Weighted average number of shares
in issue (millions) 802.4 795.3 0.9
GROUP ANALYSIS
Revenue
Turnover 17 376.9 14 208.0 22.3
Woolworths 16 022.9 13 227.3 21.1
- Clothing and home 6 985.0 6 012.2 16.2
- Food 8 718.0 6 941.5 25.6
- Logistics services and other 319.9 273.6 16.9
Country Road 1 354.0 980.7 38.1
Interest 1 022.4 765.4 33.6
Other revenue 242.6 171.4 41.5
18 641.9 15 144.8 23.1
Operating profit
Woolworths 1 788.8 1 471.3 21.6
Country Road 56.7 19.0 >100.0
1 845.5 1 490.3 23.8
Statement of changes in equity
Year ended 30 June
Shareholders` Minority
interest before shareholders`
minorities interest
Rm Rm
Shareholders` interest at the beginning of
the year 2 606.3 27.9
Movements for the period:
Issue of shares 111.8 -
Share repurchase (26.3) -
Recognised gains and losses 555.1 14.6
Distributable reserves 515.6 10.5
Profit for the year 1 074.4 12.3
Distributions to shareholders (550.4) -
Net fair value adjustments on financial
instruments (29.2) (1.8)
Share-based payments 27.0 -
Acquisition of former investment - -
BEE transaction costs (6.2) -
Non-distributable reserves
Exchange differences on translation of
foreign subsidiaries 39.5 4.1
Shareholders` interest at the end of
the year 3 246.9 42.5
Year ended 30 June
Total Total
2007 2006
Rm Rm
Shareholders` interest at the beginning of
the year 2 634.2 2 210.9
Movements for the period:
Issue of shares 111.8 72.7
Share repurchase (26.3) (61.7)
Recognised gains and losses 569.7 412.3
Distributable reserves 526.1 412.6
Profit for the year 1 086.7 837.4
Distributions to shareholders (550.4) (474.2)
Net fair value adjustments on financial
instruments (31.0) 32.2
Share-based payments 27.0 18.0
Acquisition of former investment - (0.8)
BEE transaction costs (6.2) -
Non-distributable reserves
Exchange differences on translation of
foreign subsidiaries 43.6 (0.3)
Shareholders` interest at the end of
the year 3 289.4 2 634.2
Cash flow statement
Year ended 30 June
Restated
2007 2006
Rm Rm
Cash flow from operating activities
Cash inflow from trading 1 373.7 1 072.5
Working capital movements 183.6 185.4
Cash applied to financial services assets (1 182.4) (882.2)
Cash generated by operating activities 374.9 375.7
Interest received 1 018.3 760.3
Finance costs paid (366.6) (244.6)
Tax paid (565.0) (483.4)
Cash generated by operations 461.6 408.0
Distributions to shareholders (550.4) (474.2)
Net cash outflow from operating activities (88.8) (66.2)
Cash outflow from investing activities (527.2) (598.5)
Cash flow from financing activities
Shares issued 111.8 72.7
Repurchase of shares (26.3) (61.7)
Notes issued 1 015.0 -
Notes redeemed (300.0) -
BEE transaction costs (6.2) -
Net cash inflow from financing activities 794.3 11.0
Increase/(decrease) in cash and
cash equivalents 178.3 (653.7)
Cash and cash equivalents at the beginning of the
year (623.4) 23.3
Effect of foreign exchange rate changes 22.5 7.0
Cash and cash equivalents at the end
of the year (422.6) (623.4)
GROUP ANALYSIS
Cash inflow from trading 1 373.7 1 072.5
Woolworths 1 275.5 1 019.0
Country Road 98.2 53.5
Gross capital expenditure 649.1 637.9
Woolworths 591.1 599.8
Country Road 58.0 38.1
Balance sheet
As at 30 June
Restated
2007 2006
Rm Rm
ASSETS
Non-current assets 2 951.3 2 490.6
Property, plant and equipment 5 1 867.1 1 597.7
Investment property 105.9 109.0
Loans to customers 289.8 249.2
Prepaid employment costs 61.4 39.5
Participation in export partnerships 70.4 71.6
Other loans and prepayments 190.4 144.7
Goodwill 23.0 23.0
Deferred tax 343.3 255.9
Current assets 7 491.2 6 277.7
Inventories 1 202.6 841.4
Woolworths card debtors 3 560.2 2 971.2
Credit card receivables 904.8 593.7
Accounts receivable 605.0 815.8
Loans to customers 781.2 640.9
Tax 13.1 4.5
Cash 424.3 410.2
Total assets 10 442.5 8 768.3
EQUITY AND LIABILITIES
Capital and reserves 3 289.4 2 634.2
Ordinary shareholders` interest 3 246.9 2 606.3
Minority shareholders` interest 42.5 27.9
Non-current liabilities 2 906.6 2 801.0
Interest-bearing borrowings 2 179.0 2 100.0
Operating lease accrual 426.7 420.2
Post-retirement medical aid liability 227.2 202.7
Deferred tax 73.7 78.1
Current liabilities 4 246.5 3 333.1
Accounts payable 2 092.4 1 612.1
Provisions 156.3 131.0
Tax 214.9 256.4
Interest-bearing borrowings 1 782.9 1 333.6
Total equity and liabilities 10 442.5 8 768.3
Net asset book value - per share (cents) 401.2 326.9
GROUP ANALYSIS
Total assets 10 442.5 8 768.3
Woolworths 9 881.1 8 368.1
Country Road 561.4 400.2
Inventories 1 202.6 841.4
Woolworths 1 023.1 707.9
Country Road 179.5 133.5
Approved commitments for capital expenditure 547.0 419.5
Woolworths 396.0 366.2
Country Road 151.0 53.3
segmental analysis
Year ended 30 June
Restated
2007 2006 %
Rm Rm change
Revenue
Retail
Woolworths 16 099.5 13 288.7 21.2
Country Road 1 361.8 993.6 37.1
Financial services 1 274.4 941.4 35.4
Intragroup (93.8) (78.9)
Total group 18 641.9 15 144.8 23.1
Profit before tax and exceptional item
Retail
Woolworths 1 252.8 1 069.1 17.2
Country Road 54.9 14.9 >100.0
Financial services 159.1 162.4 (2.0)
Total group 1 466.8 1 246.4 17.7
Return on equity
Retail % %
Woolworths 65.4 58.6
Country Road 34.6 6.2
Financial services 11.9 14.7
Total group 35.1 34.8
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 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 502 Substantially enacted Tax Rates and Tax Laws;
- 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 Exceptional item
During the year, 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.
4 Tax
The effective tax rate of 28.6% (2006: 32.8%) is lower than the standard rate of
normal tax primarily as a result of the recognition of a deferred tax asset
relating to asset timing differences in a subsidiary company.
5 Property, plant and equipment
During the year, the group acquired assets with a cost of R652.1m (2006:
R607.4m).
Assets with a net book value of R90.1m (2006: R49.5m) were disposed of by the
group during the same period, resulting in a profit before tax of R56.1m
(2006:R0.2m), including the disposal of property referred to in note 3.
6 Issue of shares
During the year, 13 368 429 (2006: 14 539 120) ordinary shares were issued in
terms of the group`s share incentive scheme. 1 268 051 (2006: 4 523 045) shares
were repurchased during the year.
7 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.
8 Borrowing facilities
Unutilised banking facilities amount to R2 530.0m (2006: R1 716.0m). In terms of
the articles of association, there is no limit on the group`s authority to raise
interest-bearing debt.
9 Comparative figures
Comparative figures have been restated to recognise the notional interest earned
on loans to employees granted in terms of the group`s share purchase scheme and
the corresponding amortisation of prepaid employment costs. There is no impact
on reported profits.
An amount of R8m has been reallocated from tax payable to trade and other
payables as at 30 June 2006.
10 Audit opinion
These abridged financial statements have been extracted from the audited
financial statements on which Ernst & Young Inc and SAB & T Inc have issued an
unqualified report. This report is available for inspection at the company`s
registered office.
Commentary
Group results
The 23.1% increase in group revenue to R18.6bn reflected the improved growth in
retail sales and increased interest earned from financial services products.
The gross margin was maintained at 34.4%. This included one-off costs of R45m
arising from the final phase of the implementation of the new stock system.
Operating profit grew by 23.8% to R1.8bn, despite being unable to pass on the
higher interest rates to our credit customers as a result of a fixed usury rate
until the last three months of the financial year.
Expenses increased by 25.1% through higher bad debts and associated provisions
arising from a tougher credit environment. Country Road expenses showed a
significant uplift due to the fluctuations in currency and the change to the
concession model.
The operating margin improved to 9.9% (2006: 9.8%).
Interest paid increased by 55.3% due to higher borrowings through the growth in
our books and the increasing interest rates. A reduction in the effective tax
rate resulted mainly from recognising a deferred tax asset due to asset timing
differences in Country Road.
Diluted headline earnings per share increased by 21.8% from 103.0 cents per
share to 125.5 cents per share. The pre-tax profit of R54.6m from the disposal
of land in Midrand contributed to the higher increase in diluted earnings per
share of 27.5%. Return on equity increased to 35.1% (2006: 34.8%).
A total dividend of 76.0 cents per share is declared for the year, representing
a 20.6% increase from the prior year.
operating review
Woolworths
Trading environment
Consumer spending was high but did slow towards the end of the period.
Retail
Clothing and general merchandise improved performance with sales growing by
16.2% in total and 12.8% in comparable stores. Inflation averaged 2.8% over the
period. Good availability in core ranges, entrenched taste levels in menswear
and an improved value range in childrenswear contributed to the improved
performance.
Food continued to perform well. Sales grew by 25.6% in total and 15.1% in
comparable stores. Inflation averaged approximately 8.3% over the period.
Growth in this division continues to be driven by quality and innovation and
store roll-out, enabling customers to use us more conveniently as their main
shop.
Trading space
Trading space was expanded in clothing and general merchandise by 3.6% and 12.1%
in food as at 30 June 2007.
Financial services
Revenue increased by 35.4% as a result of high growth in our books of 25.3% and
the increase in interest rates over the period.
The interest yield grew to 19.9% (2006: 19.0%).
The tougher collections environment resulted in net bad debt and related
provision charges increasing to 6.9% (2006: 5.5%) of the gross book.
Country Road
Sales increased by 15.8% in Australian dollar terms with a strong performance in
the second half. The fashionability of ranges and the continued drive to provide
better value were well received by customers.
Prospects
Higher interest rates, a slow down in credit and increasing food prices are
expected to slow consumer spending. The brand though is well positioned for the
evolving market and we expect to show acceptable real growth in the year ahead.
Empowerment
On 12 June 2007 shareholders approved a BEE transaction whereby 10% of the
company`s ordinary issued share capital was set aside for eligible
Woolworths employees. There are approximately 17 000 participants, 90% of whom
are black. The scheme had no impact on the reported results as the shares were
issued after the financial year end.
Our people are the real drivers of the Woolworths brand. We welcome them as part
owners of our business. We know this will encourage them to keep on making the
`Woolies difference`.
Changes to the board of directors
On 1 July 2007 Judy Dlamini was appointed to the board as a non-executive
director.
DA Hawton SN Susman
Chairman Chief executive officer Cape Town, 23 August 2007
Dividend payment
Notice is hereby given that the directors have declared a final dividend of 46.5
cents per share for the six months ended 30 June 2007.
The salient dates for the dividend will be as follows:
Last day to trade to receive dividend Friday, 7 September 2007
Shares commence trading "ex" dividend Monday, 10 September 2007
Record date Friday, 14 September 2007
Payment date Monday, 17 September 2007
Share certificates may not be dematerialised or rematerialised between Monday,
10 September 2007 and Friday, 14 September 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, 23 August 2007
directorate and statutory information
Non-executive directors: Buddy Hawton (Chairman), Peter Bacon (British), Mair
Barnes (British), Nigel Colne (British), Judy Dlamini, 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 Inc and SAB & T Inc
Bankers: The Standard Bank of South Africa Limited Sponsor: Rand Merchant Bank
(A division of FirstRand Bank Limited)
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001
visit our investor relations site:
www.woolworthsholdings.co.za
Date: 23/08/2007 08:00:03 Supplied by www.sharenet.co.za
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