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WHL - Woolworths Holdings - Audited Group Results For The Year Ended 30 June
2008 and dividend declaration
WOOLWORTHS HOLDINGS LIMITED
Registration number: 1929/001986/06
Share code: WHL & ISIN: ZAE000063863
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2008
financial highlights
- turnover up 15.5%
- profit before tax, exceptional items and BEE charge up 6.2%
- adjusted HEPS up 4.3%
- total dividend per share increased to 79 cents
consolidated income statement
Year ended 30 June 2008 2007 %
Note Rm Rm change
Revenue 21 753.6 18 641.9 16.7
Turnover 20 064.9 17 376.9 15.5
Cost of sales 13 076.7 11 399.9 14.7
Gross profit 6 988.2 5 977.0 16.9
Other revenue 1 688.7 1 265.0 33.5
Expenses 6 670.3 5 396.5 23.6
Depreciation and amortisation 374.4 316.7
Occupancy cost 1 073.6 806.0
Employment cost 2 560.6 2 129.3
Net bad debts and bad debt
provisions 584.3 351.5
Other operating cost 2 077.4 1 793.0
Operating profit 2 006.6 1 845.5 8.7
Finance costs 502.5 378.7 32.7
Profit before exceptional item 1 504.1 1 466.8 2.5
Exceptional item - 54.6
Profit before tax 1 504.1 1 521.4 (1.1)
Tax 4 552.5 434.7 27.1
Profit after tax 951.6 1 086.7 (12.4)
Attributable to:
Shareholders of the parent 943.1 1 074.4 (12.2)
Minority shareholders 8.5 12.3 (30.9)
Reconciliation of headline
earnings
Earnings attributable to
shareholders of the parent 943.1 1 074.4 (12.2)
BEE preference dividend paid (6.7) -
Basic earnings 936.4 1 074.4
Loss/(profit) on disposal of
property, plant and equipment 0.8 (56.1)
Foreign exchange profit realised
on repayment of loan by subsidiary - (1.1)
Total tax impact of adjustments (0.2) 8.1
Headline earnings 937.0 1 025.3 (8.6)
BEE expense 53.8 -
STC on share buy-back 20.0 -
Recognition of Country Road
deferred tax asset - (64.6)
Adjusted headline earnings 1 010.8 960.7 5.2
Headline earnings per share
(cents) 115.7 127.8 (9.5)
Earnings per share (cents) 115.6 133.9 (13.7)
Adjusted headline earnings per
share (cents) 124.8 119.7 4.3
Diluted headline earnings per
share (cents) 5 112.9 125.5 (10.0)
Diluted earnings per share (cents) 5 112.8 131.5 (14.2)
Adjusted diluted headline
earnings per share (cents) 5 120.8 117.6 2.7
Dividend per ordinary share
(cents) 79.0 76.0 3.9
Dividend cover (based on adjusted
headline earnings per share) 1.6 1.6
Dividend per preference share
(cents) 11.1 5.1 >100.0
Number of shares in issue
(millions) 795.5 809.3 (1.7)
Weighted average number of shares
in issue (millions) 809.9 802.4 0.9
GROUP ANALYSIS
Revenue
Turnover 20 064.9 17 376.9 15.5
Woolworths 18 146.5 16 022.9 13.3
- Clothing and home 7 409.8 6 985.0 6.1
- Food 10 360.3 8 718.0 18.8
- Logistics services and other 376.4 319.9 17.7
Country Road 1 918.4 1 354.0 41.7
Interest 1 359.8 1 022.4 33.0
Other revenue 328.9 242.6 35.6
21 753.6 18 641.9 16.7
Operating profit
Woolworths 1 904.6 1 788.8 6.5
Country Road 102.0 56.7 79.9
2 006.6 1 845.5 8.7
consolidated statement of changes in equity
Year ended 30 June Shareholders` Minority
interest before shareholders`
minorities interest
Note Rm Rm
Shareholders` interest at
the beginning of the year 3 246.9 42.5
Movements for the year:
Issue of shares 7 20.4 -
Share repurchase 7 (200.0) -
Recognised gains and losses 463.4 9.6
Distributable reserves 387.8 1.0
Profit for the year 943.1 8.5
Distributions to shareholders (629.8) (5.7)
Net fair value adjustments on
financial instruments 3.2 (1.8)
Share-based payments 74.3 -
BEE transaction costs (3.0) -
Non-distributable reserves
Exchange differences on
translation of
foreign subsidiaries 75.6 8.6
Shareholders` interest at the
end of the year 3 530.7 52.1
Total Total
2008 2007
Rm Rm
Shareholders` interest at
the beginning of the year 3 289.4 2 634.2
Movements for the year:
Issue of shares 20.4 111.8
Share repurchase (200.0) (26.3)
Recognised gains and losses 473.0 569.7
Distributable reserves 388.8 526.1
Profit for the year 951.6 1 086.7
Distributions to shareholders (635.5) (550.4)
Net fair value adjustments on financial
instruments 1.4 (31.0)
Share-based payments 74.3 27.0
BEE transaction costs (3.0) (6.2)
Non-distributable reserves
Exchange differences on translation of
foreign subsidiaries 84.2 43.6
Shareholders` interest at the end of
the year 3 582.8 3 289.4
consolidated cash flow statement
Year ended 30 June 2008 2007
Rm Rm
Cash flow from operating activities
Cash inflow from trading 1 308.9 1 373.7
Working capital movements (331.9) 183.6
Cash applied to financial services assets (24.4) (1 182.4)
Cash generated by operating activities 952.6 374.9
Interest received 1 351.1 1 018.3
Finance costs paid (489.7) (366.6)
Tax paid (747.0) (565.0)
Cash generated by operations 1 067.0 461.6
Distributions to shareholders (635.5) (550.4)
Net cash inflow/(outflow) from operating activities 431.5 (88.8)
Cash outflow from investing activities (510.4) (527.2)
Cash flow from financing activities
Shares issued 20.4 111.8
Repurchase of shares (200.0) (26.3)
Notes issued - 1 015.0
Notes redeemed (436.0) (300.0)
BEE transaction costs (3.0) (6.2)
Long-term borrowings raised 1 500.0 -
Long-term borrowings repaid (500.0) -
Net cash inflow from financing activities 381.4 794.3
Increase in cash and cash equivalents 302.5 178.3
Cash and cash equivalents at the
beginning of the year (422.6) (623.4)
Effect of foreign exchange rate changes 29.4 22.5
Cash and cash equivalents at the end of the year (90.7) (422.6)
GROUP ANALYSIS
Cash inflow from trading 1 308.9 1 373.7
Woolworths 1 154.8 1 275.5
Country Road 154.1 98.2
Gross capital expenditure 638.4 649.1
Woolworths 538.9 591.1
Country Road 99.5 58.0
consolidated balance sheet
As at 30 June 2008 2007
Note Rm Rm
ASSETS
Non-current assets 2 798.1 2 977.2
Property, plant and equipment 6 1 810.7 1 543.9
Investment property 105.9 105.9
Intangible assets 6 319.0 346.2
Loans to customers - 289.8
Prepaid employment costs 45.5 61.4
Participation in export partnerships 66.3 70.4
Other loans and prepayments 153.6 186.4
Derivative financial instruments 3.1 29.9
Deferred tax 294.0 343.3
Current assets 3 023.7 7 465.3
Inventories 1 371.4 1 202.6
Woolworths card debtors - 3 560.2
Credit card receivables - 904.8
Trade and other receivables 697.4 574.9
Loans to customers - 781.2
Derivative financial instruments 30.0 4.2
Tax 99.3 13.1
Cash 825.6 424.3
Assets of disposal group classified as held
for sale 8 5 440.0 -
Total assets 11 261.8 10 442.5
EQUITY AND LIABILITIES
Capital and reserves 3 582.8 3 289.4
Interest of shareholders of the parent 3 530.7 3 246.9
Minority shareholders` interest 52.1 42.5
Non-current liabilities 2 267.5 2 918.3
Interest-bearing borrowings 1 500.0 2 179.0
Operating lease accrual 450.0 426.7
Derivative financial instruments - 11.7
Post-retirement medical aid liability 251.2 227.2
Deferred tax 66.3 73.7
Current liabilities 3 209.4 4 234.8
Trade and other payables 1 998.7 2 067.2
Provisions 213.3 156.3
Derivative financial instruments 27.0 13.5
Tax 54.1 214.9
Overdrafts and short-term interest-bearing
borrowings 916.3 1 782.9
Liabilities of disposal group classified as
held for sale 8 2 202.1 -
Total equity and liabilities 11 261.8 10 442.5
Net asset book value - per share (cents) 443.8 401.2
GROUP ANALYSIS
Total assets 11 261.8 10 442.5
Woolworths 10 520.6 9 881.1
Country Road 741.2 561.4
Inventories 1 371.4 1 202.6
Woolworths 1 154.0 1 023.1
Country Road 217.4 179.5
Approved commitments for capital expenditure 681.2 547.0
Woolworths 486.1 396.0
Country Road 195.1 151.0
segmental analysis
Year ended 30 June 2008 2007 %
Rm Rm change
Revenue
Retail
Woolworths 18 242.1 16 099.5 13.3
Country Road 1 939.3 1 361.8 42.4
Financial services 1 662.9 1 274.4 30.5
Intra-group (90.7) (93.8)
Total group 21 753.6 18 641.9 16.7
Profit before tax and exceptional item
Retail
Woolworths 1 245.0 1 220.4 2.0
Country Road 101.0 54.9 84.0
Financial services 158.1 191.5 (17.4)
Total group 1 504.1 1 466.8 2.5
Return on equity
Retail % %
Woolworths 50.5 66.2
Country Road* 18.1 34.6
Financial services** 10.0 14.3
Total group 27.6 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 year.
notes
1 Basis of preparation
The consolidated financial statements have been prepared in terms of the
provisions of the South African Companies Act of 1973 (as amended) and IAS 34
Interim Financial Reporting using accounting policies that are consistent with
International Financial Reporting Standards (IFRS).
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 2007, except for the adoption of IFRS 7 Financial Instruments:
Disclosure that became effective during the current year 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 year.
3 Restatement of comparative figures
Net bad debts and bad debt provisions are disclosed separately in the income
statement for the current and comparative year. Previously these were included
in
other operating costs.
Segmental return on equity and profit before tax and exceptional items were
restated due to a change in costs allocated to the Financial Services segment.
Derivative financial assets have been separately disclosed on the face of the
balance sheet for both the current and comparative year.
Computer software, previously included in property, plant and equipment, and
goodwill are now disclosed as intangible assets.
None of these restatements had an impact on reported results.
4 Tax
The effective tax rate of 36.7% (2007: 28.6%) is higher than the standard rate
of normal tax mainly due to the impact of the non-deductible IFRS 2 charge
arising from the group`s BEE employee share ownership and executive share
incentive schemes, and STC incurred on share buy-backs.
The lower effective rate in the prior year resulted from the recognition of a
deferred tax asset relating to asset timing differences in a subsidiary
company.
5 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 schemes and
preference shares issued in terms of the BEE employee share ownership scheme.
6 Property, plant and equipment and intangible assets
During the year, the group acquired assets with a cost of R638.4m (2007:
R652.1m).
Assets with a net book value of R70.7m (2007: R90.1m) were disposed of by the
group during the same period, resulting in a loss before tax of R0.8m (2007:
profit of R56.1m).
7 Issue and repurchase of shares
During the year, 4 074 229 (2007: 13 368 429) ordinary shares were issued in
terms of the group`s share incentive scheme.
17 872 545 (2007: 1 268 051) shares were repurchased during the year.
8 Disposal group
On 16 April 2008, the group announced plans to dispose of 50% plus one share of
its interest in the issued share capital of Woolworths Financial Services
(Proprietary) Limited to Absa Bank Limited.
At 30 June 2008, the transaction was not completed; however, in the opinion of
the directors, conclusion of the transaction is highly probable. As a result,
the affected assets and liabilities are disclosed separately on the face of the
balance sheet in terms of IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations.
The major classes of assets and liabilities of Woolworths Financial Services
classified as held for sale at 30 June 2008 are as follows:
2008
Rm
Assets
Loans to customers 1 008.3
Woolworths card debtors 3 451.6
Credit card receivables 959.7
Derivative financial instrument 20.4
Assets classified as held for sale 5 440.0
Liabilities
Interest-bearing borrowings 2 179.0
Derivative financial instrument 23.1
Liabilities classified as held for sale 2 202.1
Net assets classified as held for sale 3 237.9
Refer to note 12.1
9 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.
10 The Woolworths Black Economic Empowerment Employee Share Ownership Scheme
During the year ended 30 June 2008, 88 267 306 convertible, redeemable, non
-cumulative participating preference shares were issued to employees of the
group in terms of the Woolworths Black Economic Empowerment Employee Share
Ownership Scheme.
This resulted in an additional share-based payment charge of R53.8m being
recognised in employment costs.
The ordinary shares expected to be issued at the redemption of the preference
shares resulted in additional dilution of 1.8% in the weighted average number
of shares for the year ended June 2008.
11 Borrowing facilities
Unutilised banking facilities amount to R2 875.1m (2007: R2 530.0m). 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
12.1 Disposal of 50% plus one share of Woolworths Financial Services
(Proprietary)
Limited
Competition Tribunal authorisation for the transaction discussed in note 8 was
obtained on 17 July 2008. Certain conditions precedent to the sale agreement
still have to be fulfilled before the transaction is completed. The directors
expect that the transaction will be concluded by 30 September 2008.
The disposal of 50% plus one share of our interest in Woolworths Financial
Services (Proprietary) Limited to Absa Bank Limited meets the definition of a
non-adjusting post-balance sheet event in IAS 10 Events After the Balance
Sheet Date.
12.2 Repurchase and cancellation of treasury shares
The repurchase and cancellation of treasury shares held by E-Com (Proprietary)
Limited was authorised at a general shareholders` meeting on 18 August 2008.
13 Related party transactions
During the year ended 30 June 2008, group companies entered into various
related party 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 Audit opinion
These abridged consolidated 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.
15 Approval of annual financial statements
The annual financial statements were approved by the board of directors on 20
August 2008.
commentary
Group results
Group turnover grew by 15.5% for the fifty three weeks ended 30 June 2008, with
lower growth in the second half reflecting the further slowdown in South
African consumer spending.
Gross margin increased from 34.4% to 34.8%.
Profit before exceptional items and the BEE charge grew by 6.2% to R1.6bn
despite the higher bad debt.
Interest paid increased by 32.7% as a result of growth of 12.7% in the average
financial services books and the higher cost of borrowings.
The effective tax rate increased from 28.6% to 36.7%, mainly due to the
recognition
last year of both the sale of land and the Country Road deferred tax asset, as
well
as STC on the share repurchases and the BEE charge in the current year.
Adjusted headline earnings per share increased by 4.3% to 124.8 cents per
share.
A final ordinary dividend of 49.5 cents per share has been declared. The total
dividend per share for the year amounts to 79.0 cents.
operating review
Woolworths
Trading environment
Despite an optimistic early start to the year, trading conditions steadily
worsened as higher interest rates and increases in fuel and food prices were
felt by consumers. The interest increase in September 2007 had a significant
effect on
consumer spending and the deterioration in consumer spend has continued to
increase. In line with international trends, middle and upper income customers
have been hard hit as household debt burdens increased materially.
Retail
Overall sales grew by 13.3% reflecting the relative decline in disposable
income in Woolworths core customer base. Clothing and general merchandise
sales grew by 6.1%. Kidswear was the only category to show real improvement
on the prior year. Average clothing and general merchandise inflation for
the year of 8.5% (down from 9.6% in the first half) demonstrated the heightened
focus on value, especially at opening price points.
Woolworths food sales gained 18.8% for the full year but showed slower growth
in the second half of the year, as newly acquired middle-income Woolworths
food customers became increasingly cautious with their diminishing disposable
income. Our prices on more basic supermarket commodities have been sharpened
and are now highly competitive. Inflation averaged 13.1% but is now coming off
its highs.
Costs in the second half grew by 10.6% (first half: 18.4%).
Trading space
Trading space growth slowed and the focus shifted to fewer, larger format food
stores and essential full line stores. Total footage grew by 7.3%, with an
increase of 4.8% in clothing and general merchandise space and 14.4% in food
footage. This new footage has added significant cost to the business and should
be profit enhancing into the future.
Financial services
Income for the period increased by 30.5% to R1.7bn. Interest yields grew by
3.6% to 23.5%.
Net bad debts including recovery costs increased to 7.9% (2007: 4.9%) of the
gross book. There are some early indications that the level of bad debts may
be stabilising.
Country Road
Country Road out-performed the market, delivering revenue growth of 22.0% and
growing pre-tax profit by 54.8% in Australian dollars.
Outlook
The economic environment, especially for Woolworths core customers, is tough and
we expect this to continue through this coming year. The business is driving
sales through sharper pricing whilst continuing to improve quality and
innovation. In these times of uncertain growth our focus will remain on
rigorously controlling costs.
Changes to the board of directors
On 31 May 2008 Richard Inskip resigned as a director. The board would like to
thank Richard for his valuable contribution and wish him every success in his
future ventures.
On 31 July 2008 Judy Dlamini resigned as a director and the board would like to
thank her for her services.
DA Hawton SN Susman
Chairman Chief executive officer
Cape Town, 20 August 2008
dividend declaration
Notice is hereby given that the directors have declared a final cash dividend
of 49.5 cents per ordinary share for the six months ended 30 June 2008.
The salient dates for the dividend will be as follows:
Last day to trade to receive dividend
Friday, 5 September 2008
Shares commence trading "ex" dividend
Monday, 8 September 2008
Record date
Friday, 12 September 2008
Payment date
Monday, 15 September 2008
Share certificates may not be dematerialised or rematerialised between Monday,
8 September 2008 and Friday, 12 September 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 ordinary 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.
A final cash dividend of 7.9 cents per preference share for the six months
ended 30 June 2008 will be paid to the beneficiaries of the Woolworths Employee
Share Ownership Scheme on 15 September 2008.
CL Lowe
Group secretary Cape Town, 20 August 2008
directorate and statutory information
Non-executive directors:
Buddy Hawton (Chairman), Peter Bacon (British), Nigel Colne (British), Brian
Frost, Mike Leeming, Chris Nissen, Sindi Zilwa
Executive directors:
Simon Susman (CEO), 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 (Pty) Limited, 70 Marshall Street, Johannesburg
2001
Date: 21/08/2008 08:00:06 Supplied by www.sharenet.co.za
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