Wrap Text
WHL - Woolworths Holdings - Unaudited Condensed Group Results For The
Twenty Six Weeks Ended December 2007 And Dividend Declaration
WOOLWORTHS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 1929/001986/06)
Share code: WHL & ISIN: ZAE000063863
UNAUDITED CONDENSED GROUP RESULTS FOR THE TWENTY SIX WEEKS ENDED DECEMBER 2007
overview
financial
- turnover up 16.1%
- profit before exceptional item and BEE transaction down 2.1%
- HEPS adjusted for BEE transaction down 5.9%
- diluted HEPS down 12.3%
- dividend per share maintained at 29.5 cents
trading
- clothing and general merchandise turnover up 7.3%
- food turnover up 18.8%
- financial services revenue up 39.0%
consolidated income statement
26 weeks ended
December
Restated
2007 2006 %
Note Rm Rm change
Revenue 10 557.1 8 970.4 17.7%
Turnover 9 756.5 8 406.5 16.1%
Cost of sales 6 357.6 5 522.8 15.1%
Gross profit 3 398.9 2 883.7 17.9%
Other revenue 800.6 563.9 42.0%
Expenses 3 213.7 2 490.0 29.1%
Depreciation 176.6 155.5
Occupancy cost 496.2 398.9
Employment cost 9 1 234.9 954.0
Net bad debt and bad debt
provision 282.4 137.0
Other operating cost 1 023.6 844.6
Operating profit 985.8 957.6 2.9%
Finance cost 242.2 171.9 40.9%
Profit before exceptional item 743.6 785.7 (5.4%)
Exceptional item - 54.6
Profit before tax 743.6 840.3 (11.5%)
Tax 4 274.4 273.1 0.5%
Profit after tax 469.2 567.2 (17.3%)
Attributable to:
Shareholders of the parent 465.1 563.6 (17.5%)
Minority shareholders 4.1 3.6 13.9%
Reconciliation of headline earnings 2
Earnings attributable to
shareholders of the parent 465.1 563.6 (17.5%)
BEE preference dividend paid 9 (4.5) -
Basic earnings 460.6 563.6
Profit on disposal of property,
plant and equipment (0.2) (56.4)
Foreign exchange profit realised
on repayment of
loan by subsidiary - (1.1)
Total tax impact of adjustments 0.1 8.5
Headline earnings 5 460.5 514.6 (10.5%)
Headline earnings per share (cents) 5 56.9 64.4 (11.7%)
Earnings per share (cents) 6 56.9 70.5 (19.3%)
Headline earnings per share
adjusted for the
impact of the BEE employee share
ownership scheme (cents) 60.6 64.4 (5.9%)
Diluted headline earnings per
share (cents) 5 55.6 63.4 (12.3%)
Diluted earnings per share (cents) 6 55.6 69.3 (19.8%)
Dividend per ordinary share (cents) 29.5 29.5
Dividend cover (based on headline
earnings per share) 1.9 2.2
Dividend per preference share (cents) 3.2 -
Number of shares in issue (millions) 812.1 800.4 1.5%
Weighted average number of shares
in issue (millions) 810.0 799.2 1.4%
Revenue
Turnover 9 756.6 8 406.5 16.1%
Woolworths 8 876.5 7 810.1 13.7%
- Clothing and general merchandise 3 714.5 3 460.2 7.3%
- Food 4 977.4 4 191.3 18.8%
- Logistics services and other 184.6 158.6 16.4%
Country Road 880.1 596.4 47.6%
Interest 663.8 448.7 47.9%
Other revenue 136.8 115.2 18.8%
10 557.2 8 970.4 17.7%
Operating profit
Woolworths 937.0 926.4 1.1%
Country Road 48.8 31.2 56.4%
985.8 957.6 2.9%
52 weeks
ended
June 2007
Rm
Revenue 18 641.9
Turnover 17 376.9
Cost of sales 11 399.9
Gross profit 5 977.0
Other revenue 1 265.0
Expenses 5 396.5
Depreciation 316.7
Occupancy cost 806.0
Employment cost 2 129.3
Net bad debt and bad debt provision 351.5
Other operating cost 1 793.0
Operating profit 1 845.5
Finance cost 378.7
Profit before exceptional item 1 466.8
Exceptional item 54.6
Profit before tax 1 521.4
Tax 434.7
Profit after tax 1 086.7
Attributable to:
Shareholders of the parent 1 074.4
Minority shareholders 12.3
Reconciliation of headline earnings
Earnings attributable to shareholders of the parent 1 074.4
BEE preference dividend paid -
Basic earnings 1 074.4
Profit on disposal of property, plant and equipment (56.1)
Foreign exchange profit realised on repayment of
loan by subsidiary (1.1)
Total tax impact of adjustments 8.1
Headline earnings 1 025.3
Headline earnings per share (cents) 127.8
Earnings per share (cents) 133.9
Headline earnings per share adjusted for the
impact of the BEE employee share ownership scheme (cents) 127.8
Diluted headline earnings per share (cents) 125.5
Diluted earnings per share (cents) 131.5
Dividend per ordinary share (cents) 76.0
Dividend cover (based on headline earnings per share) 1.7
Dividend per preference share (cents) 5.1
Number of shares in issue (millions) 809.3
Weighted average number of shares in issue (millions) 802.4
Revenue
Turnover 17 376.9
Woolworths 16 022.9
- Clothing and general merchandise 6 985.0
- Food 8 718.0
- Logistics services and other 319.9
Country Road 1 354.0
Interest 1 022.4
Other revenue 242.6
18 641.9
Operating profit
Woolworths 1 788.8
Country Road 56.7
1 845.5
consolidated balance sheet
As at
December
Restated
2007 2006
Note Rm Rm
ASSETS
Non-current assets 3 066.3 2 778.0
Propery, plant and equipment 7 2 017.3 1 801.5
Investment property 105.9 109.0
Loans to customers 286.3 271.6
Prepaid employment costs 5 59.8 39.5
Participation in export partnerships 69.9 71.2
Goodwill 23.0 23.0
Other loans 5 149.1 176.6
Deferred tax 355.0 285.6
Current assets 8 373.2 7 443.0
Inventories 1 473.2 1 175.1
Woolworths card debtors 3 534.4 3 269.6
Credit card receivables 966.2 752.1
Accounts receivable 712.3 911.9
Loans to customers 771.8 698.4
Tax 48.4 28.8
Cash 866.9 607.1
Total assets 11 439.5 10 221.0
EQUITY AND LIABILITIES
Capital and reserves 3 417.9 2 940.2
Interest of shareholders of the parent 3 373.8 2 908.2
Minority shareholders` interest 44.1 32.0
Non-current liabilities 3 970.7 2 353.3
Interest-bearing borrowings 3 179.0 1 600.0
Operating lease accrual 434.1 433.3
Post-retirement medical aid liability 240.6 214.3
Deferred tax 117.0 105.7
Current liabilities 4 050.9 4 927.5
Accounts payable 2 395.6 2 015.5
Provisions 169.6 138.7
Tax 248.1 334.6
Interest-bearing borrowings 1 237.6 2 438.7
Total equity and liabilities 11 439.5 10 221.0
Net asset book value-per share (cents) 415.4 363.3
GROUP ANALYSIS
Total assets 11 439.5 10 221.0
Woolworths 10 833.7 9 808.0
Country Road 605.8 413.0
Inventories 1 473.2 1 175.1
Woolworths 1 273.7 1 054.1
Country Road 199.5 121.0
Approved commitment for capital expenditure 513.6 340.2
Woolworths 440.2 320.4
Country Road 73.4 19.8
As at
June 2007
Rm
ASSETS
Non-current assets 2 951.3
Property, plant and equipment 1 867.1
Investment property 105.9
Loans to customers 289.8
Prepaid employment costs 61.4
Participation in export partnerships 70.4
Goodwill 23.0
Other loans 190.4
Deferred tax 343.3
Current assets 7 491.2
Inventories 1 202.6
Woolworths card debtors 3 560.2
Credit card receivables 904.8
Accounts receivable 605.0
Loans to customers 781.2
Tax 13.1
Cash 424.3
Total assets 10 442.5
EQUITY AND LIABILITIES
Capital and reserves 3 289.4
Interest of shareholders of the parent 3 246.9
Minority shareholders` interest 42.5
Non-current liabilities 2 906.6
Interest-bearing borrowings 2 179.0
Operating lease accrual 426.7
Post-retirement medical aid liability 227.2
Deferred tax 73.7
Current liabilities 4 246.5
Accounts payable 2 092.4
Provisions 156.3
Tax 214.9
Interest-bearing borrowings 1 782.9
Total equity and liabilities 10 442.5
Net asset book value-per share (cents) 401.2
GROUP ANALYSIS
Total assets 10 442.5
Woolworths 9 881.1
Country Road 561.4
Inventories 1 202.6
Woolworths 1 023.1
Country Road 179.5
Approved commitment for capital expenditure 547.0
Woolworths 396.0
Country Road 151.0
consolidated statement of changes in equity
52 weeks
ended
June 2007
Rm
Shareholders` interest at the beginning of the period 2 634.2
Movements for the period:
Issue of shares 111.8
Issue of BEE shares -
Share repurchase (26.3)
Recognised gains and losses 569.7
Distributable reserves 526.1
Profit for the period 1 086.7
Dividends to shareholders (550.4)
Net fair value adjustments on financial instruments (31.0)
Share-based payments 27.0
BEE transaction costs (6.2)
Non-distributable reserves
Exchange differences on translation of foreign subsidiaries 43.6
Shareholders` interest at the end of the period 3 289.4
Shareholders` Minority
interest before shareholders`
minorities interest
Rm Rm
Shareholders` interest at the
beginning of the period 3 246.9 42.5
Movements for the period:
Issue of shares 12.7 -
Issue of BEE shares 0.1 -
Share repurchase - -
Recognised gains and losses 114.1 1.6
Distributable reserves 117.3 2.0
Profit for the period 465.1 4.1
Dividends to shareholders (381.1) (3.7)
Net fair value adjustments on
financial instruments 5.1 1.6
Share-based payments 31.2 -
BEE transaction costs (3.0) -
Non-distributable reserves
Exchange differences on translation
of foreign subsidiaries (3.2) (0.4)
Shareholders` interest at the end
of the period 3 373.8 44.1
26 weeks ended
December
Total Total
2007 2006
Rm Rm
Shareholders` interest at the
beginning of the period 3 289.4 2 634.2
Movements for the period:
Issue of shares 12.7 40.8
Issue of BEE shares 0.1 -
Share repurchase - -
Recognised gains and losses 115.7 265.2
Distributable reserves 119.3 257.2
Profit for the period 469.2 567.2
Dividends to shareholders (384.8) (312.1)
Net fair value adjustments on financial instruments 6.7 (10.1)
Share-based payments 31.2 12.2
BEE transaction costs (3.0) -
Non-distributable reserves
Exchange differences on translation
of foreign subsidiaries (3.6) 8.0
Shareholders` interest at the end of the period 3 417.9 2 940.2
consolidated cash flow statement
26 weeks ended
December
2007 2006
Rm Rm
Cash flow from operating activities
Cash inflow from trading 658.4 760.8
Working capital movements (99.6) (44.3)
Cash applied to financial services assets (88.8) (576.5)
Cash generated by operating activities 470.0 140.0
Interest received 661.7 448.1
Finance costs paid (237.7) (160.9)
Tax paid (244.9) (233.2)
Cash generated by operations 649.1 194.0
Dividends to shareholders (384.8) (312.1)
Net cash inflow/(outflow) from operating activities 264.3 (118.1)
Cash outflow from investing activities (282.7) (332.6)
Cash flow from financing activities
Shares issued 12.9 40.6
Repurchase of shares - -
Notes issued - -
Notes redeemed - -
BEE transaction costs (3.0) -
Long-term borrowings raised 1 500.0 -
Long-term borrowings repaid (500.0) -
Net cash inflow from financing activities 1 009.9 40.6
Increase/(decrease) in cash and cash equivalents 991.5 (410.1)
Cash and cash equivalents at the beginning of the
period (422.6) (623.4)
Effect of foreign exchange rate changes (3.6) 1.0
Cash and cash equivalents at the end of the period 565.3 (1 032.5)
GROUP ANALYSIS
Cash inflow from trading 658.4 760.8
Woolworths 581.8 710.3
Country Road 76.6 50.5
Gross capital expenditure 362.0 409.3
Woolworths 295.8 383.1
Country Road 66.2 26.2
52 weeks ended
June 2007
Rm
Cash flow from operating activities
Cash inflow from trading 1 373.7
Working capital movements 183.6
Cash applied to financial services assets (1 182.4)
Cash generated by operating activities 374.9
Interest received 1 018.3
Finance costs paid (366.6)
Tax paid (565.0)
Cash generated by operations 461.6
Dividends to shareholders (550.4)
Net cash inflow/(outflow) from operating activities (88.8)
Cash outflow from investing activities (527.2)
Cash flow from financing activities
Shares issued 111.8
Repurchase of shares (26.3)
Notes issued 1 015.0
Notes redeemed (300.0)
BEE transaction costs (6.2)
Long-term borrowings raised -
Long-term borrowings repaid -
Net cash inflow from financing activities 794.3
Increase/(decrease) in cash and cash equivalents 178.3
Cash and cash equivalents at the beginning of the period (623.4)
Effect of foreign exchange rate changes 22.5
Cash and cash equivalents at the end of the period (422.6)
GROUP ANALYSIS
Cash inflow from trading 1 373.7
Woolworths 1 275.5
Country Road 98.2
Gross capital expenditure 649.1
Woolworths 591.1
Country Road 58.0
segmental analysis
26 weeks ended
December
2007 2006 %
Rm Rm change
Revenue
Retail
Woolworths 8 926.3 7 845.8 13.8%
Country Road 884.4 601.0 47.2%
Financial services 792.9 570.5 39.0%
Intra-group (46.5) (46.9)
Total group 10 557.1 8 970.4 17.7%
Profit before tax
Retail
Woolworths 648.6 735.5 (11.8%)
Country Road 48.1 31.2 54.2%
Financial services 46.9 73.6 (36.3%)
Total group 743.6 840.3 (11.5%)
Return on equity % %
Retail
Woolworths 59.5% 60.9%
Country Road* 18.5% 25.1%
Financial services** 6.0% 11.1%
Total group 27.8% 37.5%
52 weeks
ended
June 2007
Rm
Revenue
Retail
Woolworths 16 099.5
Country Road 1 361.8
Financial services 1 274.4
Intra-group (93.8)
Total group 18 641.9
Profit before tax
Retail
Woolworths 1 252.8
Country Road 54.9
Financial services 159.1
Total group 1 466.8
Return on equity
Retail
Woolworths 65.4%
Country Road* 34.6%
Financial services** 11.9%
Total group 35.1%
* Return on equity decreased due to tax on profits, previously shielded by tax
losses.
** Return on equity for Woolworths Financial Services is calculated using the
weighted average segmental equity for the period.
notes
1 Basis of preparation
The interim financial statements comply with IAS 34 Interim Financial
Reporting. These condensed consolidated 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 June 2007.
2 Significant accounting policies
The accounting policies applied are consistent with those followed in the
preparation of the consolidated annual financial statements for the 52 weeks
ended June 2007, except for the adoption of IFRS 7 Financial Instruments:
Disclosure that became effective during the current period and had no impact on
the reported results.
Headline earnings per share and diluted headline earnings per share have been
calculated in terms of Circular 8/2007: Headline Earnings for both the current
and prior period.
3 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.
4 Tax
The tax rate of 36.9% (2006: 32.5%) results from the estimated average annual
effective income tax rate of 30.1% plus Secondary Tax on Companies (STC) on
the final dividend for the 52 weeks ended June 2007, paid in September 2007.
The estimated annual effective rate is higher than the corporate tax rate of
29% mainly due to the impact of the non-deductible IFRS 2 charge arising from
the BEE employee share ownership scheme and the group`s share incentive
scheme.
5 Restatement of comparative figures
Headline earnings per share and diluted headline earnings per share for the
twenty six weeks to December 2006 were restated to reflect a foreign exchange
profit of R1.1m on the repayment of a loan by a subsidiary.
Net bad debt and the bad debt provision are disclosed separately in the income
statement for the current and comparative period. Previously this was included
in other operating costs.
Comparative balance sheet figures have been restated as a result of the
restatement of share purchase scheme participants` loans and investments to
reflect their amortised cost.
6 Earnings per share
The difference between earnings per share and diluted earnings per share is the
impact of outstanding options under the group share incentive scheme and
preference shares issued in terms of the BEE employee share ownership scheme.
7 Property, plant and equipment
During the twenty six weeks ended December 2007, the group acquired assets with
a cost of R362.0m (2006: R409.3m).
Assets with a net book value of R35.1m (2006: R19.9m) were disposed of by the
group during the same period, resulting in a profit of R0.1m (2006: R1.8m).
8 Issue of shares
During the twenty six weeks ended December 2007, 2 818 254 (2006: 3 139 956)
ordinary shares were issued in terms of the group`s share incentive scheme.
9 The Woolworths BEE employee share ownership scheme
During the twenty six weeks ended December 2007, 88 267 306 convertible,
redeemable, non-cumulative participating preference shares were issued to
employees of the group in terms of the BEE employee share ownership scheme.
This resulted in an additional share-based payment charge of R25.5m being
recognised in employment costs.
A dividend of 5.1c (11% of the final ordinary dividend of 46.5c declared in
August 2007) was declared during the twenty six weeks ended December 2007. No
adjustment for the preference dividend in the calculation of basic and headline
earnings was required at June 2007 as the preference shares were only issued
after the 2007 year end.
Implementation of the scheme resulted in net dilution of 0.8% for the twenty
six weeks ended December 2007.
10 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.
11 Borrowing facilities
Unutilised banking facilities amount to R3 900.0m (2006: R1 168.1m). In terms
of the articles of association, there is no limit on the group`s authority to
raise interest-bearing debt.
12 Events subsequent to balance sheet date
Notes issued under the Account On Us (Proprietary) Limited asset-backed notes
programme totalling R436.0m mature and will be redeemed on 25 February 2008.
13 Related party transactions
During the twenty six weeks to December 2007, group companies entered into
various transactions. These transactions were entered into in the ordinary
course of business and under terms that are no less favourable than those
arranged with independent third parties.
All such intra-group related party transactions and outstanding balances are
eliminated in preparation of the consolidated financial statements of the
group.
14 Unaudited results
These results have not been reviewed or audited.
15 Approval of interim financial statements
The interim financial statements were approved by the board of directors on
20 February 2008.
commentary
Group results
Group turnover grew by 16.1% to R9.8bn for the twenty six weeks ended December
2007, with lower growth in the second quarter reflecting the slowdown in South
African consumer spending.
Gross margin increased from 34.3% to 34.8%.
Operating profit (excluding the non-comparable BEE charge) grew by 5.6% to
R1.0bn, impacted by a 28.0% increase in expenses primarily due to planned
expenses in South African retail, higher bad debt and non-comparable concession
costs in Country Road.
Interest paid increased by 40.9% due to higher borrowings to fund the growth in
the financial services books and increasing interest rates.
This resulted in profit before tax and exceptional items, excluding the
non-comparable BEE expense of R25.5m, decreasing by 2.1% to R769m.
The effective tax rate increased due to a higher relative STC charge and tax on
Country Road`s profits, previously shielded by tax losses.
Diluted headline earnings per share decreased by 12.3% from 63.4 cents per
share to 55.6 cents per share.
The interim dividend has been maintained at 29.5 cents per share.
operating review
Woolworths
Trading environment
Continued increases in interest rates, the implementation of the National
Credit Act and rising inflation, especially in food and fuel, have led to an
ongoing slowdown in South African consumer spending. The growth in retail
sales declined steeply in the second quarter of the year.
Retail
Clothing and general merchandise grew sales by 7.3% in total and 4.7% in
comparable stores, with an average inflation rate of approximately 9.6% over
the period. Good performances in childrenswear, footwear and accessories, the
womenswear Re and WCollection ranges, and branded beauty were offset by
disappointing sales in core womenswear ranges and lingerie.
Food continued to perform well, although below expectations. Sales grew by
18.8% in total and by 9.7% in comparable stores. Inflation averaged
approximately 12.1% over the period. Food continued with innovation in new
and upgraded products, enhanced value through competitive pricing of key
value items and promotions, and improved availability, especially over the
Christmas period.
The financial year has 53 trading weeks and as such the key trading day of
24 December is not included in the sales figures above.
Trading space
Trading space was expanded in clothing and general merchandise by 4.8% (2006:
4.2%) and by 13.1% (2006: 13.1%) in food, including the first large-format
food market at Farrarmere in Gauteng.
Financial services
Revenue increased by 39.0% as a result of growth in the combined books of 20.5%
and increases in interest rates. Book growth has slowed significantly from the
second quarter. The interest yield increased to 22.9% (2006: 18.9%).
The tougher collections environment resulted in net bad debt, including
collection costs, increasing to 7.8% (2006: 4.1%) of the gross book.
Country Road
Country Road had a strong sales performance, growing turnover by 35.0% in
Australian dollar terms. Retail sales, excluding concession sales, grew by
21.4% in Australian dollars and by 16.5% in comparable stores compared to the
prior period. The focus on providing better value and improved fashionability
continues to be well received by customers.
Prospects
Higher interest rates and the shift in the credit environment has and is
impacting our business. The group`s focus will remain on price competitiveness,
product innovation, quality and tight cost control. We expect the difficult
current trading conditions to prevail throughout 2008 and consequently the
second half profits will remain under pressure.
Change to the board of directors
On 20 February 2008 Mair Barnes resigned from the board as a non-executive
director. The board would like to thank Mair for her contribution to the group
and wishes her success in her future endeavours.
DA Hawton SN Susman
Chairman Chief executive officer Cape Town, 20 February 2008
Dividend Payment
Notice is hereby given that the directors have declared an interim cash
dividend of 29.5 cents per ordinary share for the twenty six weeks ended
December 2007.
The salient dates for the dividend will be as follows:
Last day to trade to receive dividend Friday, 7 March 2008
Shares commence trading "ex" dividend Monday, 10 March 2008
Record date Friday, 14 March 2008
Payment date Monday, 17 March 2008
Share certificates may not be dematerialised or rematerialised between
Monday, 10 March 2008 and Friday, 14 March 2008, 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.
An interim cash dividend of 3.2 cents per preference share for the twenty six
weeks ended December 2007 will be paid to the beneficiaries of the BEE employee
share ownership scheme on 17 March 2008.
CL Lowe
Group secretary Cape Town, 20 February 2008
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: 21/02/2008 07:30:01 Supplied by www.sharenet.co.za
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