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WHL - Woolworths Holdings Limited - Unaudited interim group results and cash
dividend declaration for the 26 weeks ended 26 December 2010
WOOLWORTHS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1929/001986/06
Share code: WHL
ISIN: ZAE000063863
("the company" or "the group")
UNAUDITED INTERIM GROUP RESULTS AND CASH DIVIDEND DECLARATION FOR THE 26 WEEKS
ENDED 26 DECEMBER 2010
Highlights
TURNOVER +9.8%
WOOLWORTHS RETAIL RETURN ON SALES UP FROM 7.6% to 9.0%
PROFIT BEFORE TAX +22.1%
ADJUSTED HEADLINE EARNINGS PER SHARE +25.8%
INTERIM DIVIDEND PER SHARE +32.9%
Commentary
Group results
Turnover growth of 9.8% combined with good margin improvement in Woolworths
Retail, effective cost control across the group and a significant improvement in
the impairment charge in Woolworths Financial Services resulted in profit before
tax growth of 22.1%.
The effective tax rate increased from 29.9% to 32.9%, primarily as a result of
STC on distributions.
Adjusted headline earnings per share increased by 25.8% to 100.8 cents per
share.
An interim ordinary dividend of 50.5 cents per share has been declared.
The group`s balance sheet remains strong and inventory was well managed during
the period. Shareholders` return on equity increased from 42.4% to 43.3%.
Woolworths Retail
Food sales were up 11.8% for the period. Comparable stores increased by 9.1%.
Price movement was 3% for the period. Return on sales grew from 3.8% to 5.3%.
Gross profit margins improved from 23.1% to 24.2% and profit before tax grew by
54.6%.
Clothing sales (including Country Road in South Africa) were 11.5% up for the
period. Overall clothing and general merchandise grew by 8.1% and was lower than
clothing growth due in part to the decision to rationalise the unprofitable
cellphone handset business. Price movement was 1.4%. Market share gains measured
on both a 3 month moving average basis and a 12 month moving average basis were
achieved.
Costs were well controlled, with store costs growing by only 7% on a like-for-
like basis and other operating costs by 8.2% on a normalised basis.
Total footage increased by 3.1% in corporate stores (2.8% clothing and general
merchandise and 3.7% food). Trading densities in both food and clothing and
general merchandise were improved in the period.
Country Road
Country Road grew turnover by 3.7% (including the South African operations) in
Australian dollars. Australia experienced a tough retail environment and
comparable stores declined by 9.9% in that market. The difficult conditions were
anticipated and significant cost saving initiatives were implemented during the
period to off-set this. As a result, profit before tax grew 8.3% in Australian
dollars.
Woolworths Financial Services
There was good growth in the group`s share of profit from the joint venture due
to significantly lower levels of bad debts and the restructured insurance
business. The impairment charge as a percentage of average gross receivables was
1.6% (December 2009: 6.2%) indicating real improvement in the quality of the
debt. The size of the debtors` book, however, remained at the same level as the
prior year.
Outlook
In South Africa trading for the first seven weeks has been positive and our
expectations are that turnover growth for the year will be broadly in line with
the first half.
In Australia we expect the tough trading conditions to remain and do not
anticipate sales to show a material improvement on prior period.
Shareholders are advised that the information contained in the Outlook section
above has not been reviewed and reported on by the group`s external auditors and
it does not constitute an earnings forecast.
DA Hawton I Moir
Chairman Group chief executive officer
Cape Town, 16 February 2011
Changes to the board of directors
Two long serving non-executive directors, Brian Frost and Nigel Colne, retired
at the company`s annual general meeting on 18 November 2010. On the same date
Simon Susman was appointed a non-executive director and Deputy chairman and Ian
Moir was appointed Group chief executive officer. Tom Boardman and Sir Stuart
Rose were appointed non-executive directors on 27 September 2010 and on 19
January 2011 respectively.
Dividend declaration
Notice is hereby given that the directors have declared an interim cash dividend
of 50.5 cents per ordinary share for the twenty-six weeks to 26 December 2010
(38.0 cents cash distribution per ordinary share for the same period 2009).
The salient dates for the dividend will be as follows:
Last day to trade to receive a dividend
Friday, 4 March 2011
Shares commence trading "ex" dividend
Monday, 7 March 2011
Record date
Friday, 11 March 2011
Payment date
Monday, 14 March 2011
Share certificates may not be dematerialised or rematerialised between Monday,
7 March 2011 and Friday, 11 March 2011, 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.
An interim cash dividend of 16.8 cents per preference share for the twenty-six
weeks to 26 December 2010 (8.7 cents per preference share for the same period
2009) will be paid to the beneficiaries of the Woolworths Employee Share
Ownership Scheme on Monday, 14 March 2011.
CL Lowe
Group secretary
Cape Town, 16 February 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 weeks
to 27 Jun
2010
Rm Notes
Revenue 23 663
Turnover 23 393
Cost of sales 15 656
Gross profit 7 737 3.1
Other revenue 95
Expenses 6 178
Store costs 3 940
Other operating costs 2 238
Operating profit 1 654
Investment income 175 3.1
Interest paid 151
Profit before earnings from joint ventures and associate 1 678
Earnings from joint ventures 75
Earnings from associate 6
Profit before tax 1 759
Tax 491 4
Profit after tax 1 268
Other comprehensive income:
Net fair value adjustments on financial instruments, after
tax 40
Exchange differences on translation of foreign subsidiaries 13
Other comprehensive income for the period, net of tax 53
Total comprehensive income for the period 1 321
Profit attributable to: 1 268
Shareholders of the parent 1 258
Non-controlling interest 10
Total comprehensive income attributable to: 1 321
Shareholders of the parent 1 304
Non-controlling interest 17
Reconciliation of headline earnings
Earnings attributable to shareholders of the parent 1 258
BEE preference dividend paid 11
Basic earnings 1 247
Loss on disposal of property, plant and equipment 24
Tax impact of adjustments (7)
Headline earnings 1 264
Abnormal foreign exchange related gain (57)
Adjusted headline earnings 1 207
Headline earnings per share (cents) 164.6
Earnings per share (cents) 162.4 5
Adjusted headline earnings per share (cents) 157.2
Diluted headline earnings per share (cents) 159.3
Diluted earnings per share (cents) 157.2 5
Adjusted diluted headline earnings per share (cents) 152.2
Number of shares in issue (millions) 759.5
Weighted average number of shares in issue (millions) 768.0
26 weeks 26 weeks
to 26 Dec to 27 Dec
2010 2009 %
Rm Rm change
Revenue 12 797 11 696 9.4
Turnover 12 687 11 550 9.8
Cost of sales 8 327 7 706 8.1
Gross profit 4 360 3 844 13.4
Other revenue 46 60 (23.3)
Expenses 3 304 2 989 10.5
Store costs 2 166 1 945 11.4
Other operating costs 1 138 1 044 9.0
Operating profit 1 102 915 20.4
Investment income 64 86 (25.6)
Interest paid 64 75 (14.7)
Profit before earnings from joint ventures
and associate 1 102 926 19.0
Earnings from joint ventures 65 27 >100
Earnings from associate - 3 (100.0)
Profit before tax 1 167 956 22.1
Tax 384 286 34.3
Profit after tax 783 670 16.9
Other comprehensive income:
Net fair value adjustments on
financial instruments, after tax (46) (3) >100
Exchange differences on
translation of foreign subsidiaries (6) 17
Other comprehensive income for
the period, net of tax (52) 14
Total comprehensive income for the period 731 684 6.9
Profit attributable to: 783 670 16.9
Shareholders of the parent 775 662 17.1
Non-controlling interest 8 8 -
Total comprehensive income attributable to: 731 684 6.9
Shareholders of the parent 731 674 8.5
Non-controlling interest - 10 (100.0)
Reconciliation of headline earnings
Earnings attributable to shareholders
of the parent 775 662 17.1
BEE preference dividend paid 11 7 57.1
Basic earnings 764 655 16.6
Loss on disposal of property,
plant and equipment 1 8 (87.5)
Tax impact of adjustments - (2) (100.0)
Headline earnings 765 661 15.7
Abnormal foreign exchange related gain - (42) (100.0)
Adjusted headline earnings 765 619 23.6
Headline earnings per share (cents) 100.8 85.4 18.0
Earnings per share (cents) 100.6 84.7 18.8
Adjusted headline earnings per
share (cents) 100.8 80.1 25.8
Diluted headline earnings per
share (cents) 96.6 83.4 15.8
Diluted earnings per share (cents) 96.5 82.7 16.7
Adjusted diluted headline
earnings per share (cents) 96.6 78.2 23.5
Number of shares in issue (millions) 761.7 764.2 (0.3)
Weighted average number of
shares in issue (millions) 759.3 773.6 (1.8)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At
27 Jun
2010
ASSETS Rm
Non-current assets 3 633
Property, plant and equipment 1 991
Investment properties 121
Intangible assets 392
Investment in associate 40
Investment in joint ventures 574
Prepaid employment costs 29
Participation in export partnerships 63
Other loans 95
Derivative financial instruments 1
Deferred tax 327
Current assets 5 377
Inventories 1 676
Trade and other receivables 759
Derivative financial instruments 19
Tax 6
Cash 2 917
Total assets 9 010
EQUITY AND LIABILITIES
Capital and reserves 3 453
Interest of shareholders of the parent 3 396
Non-controlling interest 57
Non-current liabilities 1 362
Interest-bearing borrowings 521
Operating lease accrual 447
Derivative financial instruments 15
Post-retirement medical benefit liability 292
Deferred tax 87
Current liabilities 4 195
Trade and other payables 2 608
Provisions 248
Derivative financial instruments 20
Tax 285
Interest-bearing borrowings 1 034
Total equity and liabilities 9 010
Net asset book value - per share (cents) 447
GROUP ANALYSIS Restated
Total assets 9 010
Woolworths Retail 5 145
Country Road 850
Treasury 2 442
Woolworths Financial Services 573
Inventories 1 676
Woolworths Retail 1 354
Country Road 322
Approved commitment for capital expenditure 786
Woolworths Retail 652
Country Road 134
At At
26 Dec 27 Dec
2010 2009
ASSETS Notes Rm Rm
Non-current assets 3 679 3 532
Property, plant and equipment 6 2 020 1 989
Investment properties 121 121
Intangible assets 6 440 367
Investment in associate 39 37
Investment in joint ventures 589 541
Prepaid employment costs 23 33
Participation in export partnerships 61 65
Other loans 85 125
Derivative financial instruments - -
Deferred tax 301 254
Current assets 5 073 5 301
Inventories 1 837 1 814
Trade and other receivables 812 910
Derivative financial instruments 1 3
Tax 10 1
Cash 2 413 2 573
Total assets 8 752 8 833
EQUITY AND LIABILITIES
Capital and reserves 3 726 3 168
Interest of shareholders of the parent 3 669 3 116
Non-controlling interest 57 52
Non-current liabilities 1 300 1 340
Interest-bearing borrowings 511 528
Operating lease accrual 461 465
Derivative financial instruments 1 17
Post-retirement medical benefit liability 303 283
Deferred tax 24 47
Current liabilities 3 726 4 325
Trade and other payables 3 012 2 753
Provisions 248 219
Derivative financial instruments 118 26
Tax 328 321
Interest-bearing borrowings 20 1 006
Total equity and liabilities 8 752 8 833
Net asset book value - per share (cents) 482 408
GROUP ANALYSIS Restated
Total assets 8 752 8 833
Woolworths Retail 5 322 5 163
Country Road 1 038 971
Treasury 1 804 2 159
Woolworths Financial Services 588 540
Inventories 1 837 1 814
Woolworths Retail 1 514 1 476
Country Road 323 338
Approved commitment for capital expenditure 399 400
Woolworths Retail 373 397
Country Road 26 3
CONSOLIDATED STATEMENT OF CASH FLOWS
52 weeks
to 27 Jun
2010
Rm
Cash flow from operating activities
Cash inflow from trading 2 220
Working capital movements 215
Cash generated by operating activities 2 435
Interest received 167
Finance costs paid (152)
Tax paid (367)
Cash generated by operations 2 083
Dividends received from associate 1
Dividends received from WFS 35
Distributions to shareholders (725)
Net cash inflow from operating activities 1 394
Cash flow from investing activities
Net investment in PPE and intangible assets (543)
Other 29
Net cash outflow from investing activities (514)
Cash flow from financing activities
Shares issued 47
Repurchase of treasury shares (410)
Share repurchase costs (1)
Payment of finance lease liabilities (20)
Short-term borrowings (repaid)/raised 20
Net cash outflow from financing activities (364)
(Decrease)/increase in cash and cash equivalents 516
Cash and cash equivalents at the beginning of the period 2 391
Effect of foreign exchange rate changes 10
Cash and cash equivalents at the end of the period 2 917
GROUP ANALYSIS Restated
Cash inflow from trading 2 220
Woolworths Retail 1 996
Country Road 224
Gross capital expenditure 607
Woolworths Retail 460
Country Road 147
26 weeks 26 weeks
to 26 Dec to 27 Dec
2010 2009
Rm Rm
Cash flow from operating activities
Cash inflow from trading 1 443 1 062
Working capital movements 223 108
Cash generated by operating activities 1 666 1 170
Interest received 64 82
Finance costs paid (74) (80)
Tax paid (384) (111)
Cash generated by operations 1 272 1 061
Dividends received from associate 1 1
Dividends received from WFS 50 20
Distributions to shareholders (523) (427)
Net cash inflow from operating activities 800 655
Cash flow from investing activities
Net investment in PPE and intangible assets (303) (309)
Other 18 5
Net cash outflow from investing activities (285) (304)
Cash flow from financing activities
Shares issued 28 18
Repurchase of treasury shares (21) (220)
Share repurchase costs - (1)
Payment of finance lease liabilities (8) (6)
Short-term borrowings (repaid)/raised (1 000) -
Net cash outflow from financing activities (1 001) (209)
(Decrease)/increase in cash and cash equivalents (486) 142
Cash and cash equivalents at the beginning of the
period 2 917 2 391
Effect of foreign exchange rate changes (18) 40
Cash and cash equivalents at the end of the period 2 413 2 573
GROUP ANALYSIS Restated
Cash inflow from trading 1 443 1 062
Woolworths Retail 1 306 941
Country Road 137 121
Gross capital expenditure 310 316
Woolworths Retail 264 225
Country Road 46 91
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
52 weeks Share-
to 27 Jun holders of
2010 the parent
Rm Notes Rm
Interest at the beginning of the period 3 072 3 396
Movements for the period:
Issue of shares 47 8 28
Shares repurchased (410) 8 (21)
Share repurchase costs (1) -
Distributions to shareholders (725) (523)
Share-based payments 149 58
Total comprehensive income for the period 1 321 731
Interest at the end of the period 3 453 3 669
Distribution per ordinary share (cents)
- ordinary 105.0
Distribution cover (based on adjusted 1.5
headline earnings per share)
Distribution per preference share (cents) 30.8
Total Total
Non- 26 weeks 26 weeks
controlling to 26 Dec to 26 Dec
interest 2010 2009
Rm Rm Rm
Interest at the
beginning of the period 57 3 453 3 072
Movements for the period:
Issue of shares - 28 18
Shares repurchased - (21) (220)
Share repurchase costs - - (1)
Distributions to shareholders (523) (427)
Share-based payments - 58 42
Total comprehensive income for the period - 731 684
Interest at the end of the period 57 3 726 3 168
Distribution per ordinary share (cents)
- ordinary 50.5 38.0
Distribution cover
(based on adjusted
headline earnings per share) 2.0 2.1
Distribution per preference share (cents) 16.8 8.7
SEGMENTAL ANALYSIS
The results of Country Road South Africa, previously recorded in the C&GM
segment, have been included in the Country Road segment in line with a change in
operational structure. Comparative results have been restated.
The following is an analysis of the group`s revenue and operating results by
reportable segment:
Restated
52 weeks
to 27 Jun
2010
Rm Notes
Revenue
Turnover 23 393
Woolworths Retail 20 557
Clothing and General Merchandise 7 913 3.2
Food 12 227
Logistics 417
Country Road 2 836 3.2
Other revenue and investment income 270
Woolworths Retail 86
Clothing and General Merchandise 21
Food 65
Country Road 25 3.2
Treasury 175
Intra-group revenue (16) 3.2
Total group 23 663
Gross profit
Woolworths Retail 6 156
Clothing and General Merchandise 3 162 3.2
Abnormal foreign exchange related gain 79
Food 2 838
Intra-group rental 77
Country Road 1 581 3.2
Total group 7 737
Profit before tax
Woolworths Retail 1 514
Clothing and General Merchandise 990 3.2
Abnormal foreign exchange related gain 79
Food 445
Country Road 142 3.2
Woolworths Financial Services 75
Treasury 28
Total group 1 759
Restated
26 weeks 26 weeks
to 26 Dec to 27 Dec
2010 2009 %
Rm Rm change
Revenue
Turnover 12 687 11 550 9.8
Woolworths Retail 11 155 10 099 10.5
Clothing and General Merchandise 4 282 3 961 8.1
Food 6 635 5 937 11.8
Logistics 238 201 18.4
Country Road 1 532 1 451 5.6
Other revenue and investment income 110 146 (24.7)
Woolworths Retail 41 52 (21.2)
Clothing and General Merchandise 8 16 (50.0)
Food 33 36 (8.3)
Country Road 5 16 (68.8)
Treasury 64 86 (25.6)
Intra-group revenue - (8) (100.0)
Total group 12 797 11 696 9.4
Gross profit Woolworths Retail 3 487 3 014 15.7
Clothing and General Merchandise 1 839 1 550 18.6
Abnormal foreign exchange related gain - 58 (100.0)
Food 1 606 1 373 17.0
Intra-group rental 42 33 27.3
Country Road 873 830 5.2
Total group 4 360 3 844 13.4
Profit before tax
Woolworths Retail 1 008 831 21.3
Clothing and General Merchandise 657 546 20.3
Abnormal foreign exchange related gain - 58 (100.0)
Food 351 227 54.6
Country Road 92 86 7.0
Woolworths Financial Services 65 27 >100
Treasury 2 12 (83.3)
Total group 1 167 956 22.1
NOTES
1 Basis of preparation
The abridged group financial statements are prepared in accordance with
International Financial Reporting Standards and the presentation and disclosure
requirements of IAS 34 Interim Financial Reporting. These abridged financial
statements do not contain all the information required in the annual financial
statements.
2 Significant accounting policies
The accounting policies applied are consistent with those followed in the
preparation of the consolidated annual financial statements for the period ended
27 June 2010, except for the adoption of the following IFRS, IFRIC
interpretations, amendments and circulars that became effective during the
current period. These changes had no significant impact on the reported results
other than giving rise to additional disclosures and a revision to the relevant
accounting policies:
- IFRS 2 Amendments - Share-based Payment: Group Share-based Payment
Transactions
3 Reclassification of comparative figures
3.1 Income received relating to investment activities has been separately
disclosed from other revenue and is excluded from operating profit.
3.2 The results, cash flows and net assets of Country Road South Africa,
previously recorded in the C&GM segment, have been included in the Country Road
segment in line with a change in operational structure.
4 Tax
The effective tax rate of 32.9% (2009: 29.9%) is higher than the standard rate
of normal tax mainly due to STC and the non-deductible IFRS 2 charge arising
from the group`s BEE employee share ownership and executive share incentive
schemes.
5 Earnings per share
The difference between earnings per share and diluted earnings per share is due
to 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 twenty-six weeks to 26 December 2010, the group acquired property,
plant and equipment at a cost of R212m (2009: R266m) and acquired intangible
assets at a cost of R98m (2009: R50m).
7 Goodwill Rm
Balance at the beginning of the period - at cost 23
Additions 36
Balance at the end of the period - at cost 59
There has been no impairment for the period.
8 Issue and repurchase of shares
During the twenty-six weeks to 26 December 2010, 3 500 331 (2009: 2 496 007)
ordinary shares were issued in terms of the group`s executive share incentive
scheme. 445 986 (2009: 11 878 892) shares were repurchased from the market by E-
Com (Proprietary) Limited and 851 827 (2009: 1 814 000) shares were repurchased
from the market by Woolworths (Proprietary) Limited. These shares are held as
treasury shares by the group.
No shares (2009: 29 497 604) shares were issued to Woolworths (Proprietary)
Limited and held as treasury shares.
9 Contingent liabilities
Various group companies are parties to legal disputes and investigations which
have arisen in the ordinary course of business. Whilst the outcome of some of
these matters cannot readily be foreseen, the directors do not expect the
outcomes to have a material financial effect.
10 Borrowing facilities
Unutilised committed banking facilities amount to R500m (2009: R1 600m). There
is no limit in the articles of association on the group`s authority to raise
interest-bearing debt.
During the period the group repaid short-term interest-bearing borrowings of R1
000m.
11 Acquisition of franchise operations
On 2 September 2010, the group announced its decision to wind down its South
African franchise operations and made offers to purchase all local franchise
stores. These offers expire on 26 June 2011.
In line with this decision, the group re-acquired franchise stores for a cash
consideration of R48m. Subsequent to the reporting date, final contracts and
heads of agreement have been reached for the re-acquisition of additional
stores.
Assets acquired at the date of acquisition Rm
Non-current assets
Property, plant and equipment 2
Re-acquired rights 10
12
Goodwill arising on acquisition
Consideration transferred 48
Less: fair value of identifiable net assets acquired 12
36
Goodwill arose on the acquisition of franchise stores, related to the value of
the business in excess of the value directly attributable to the remaining
period of the franchise contracts.
These acquisitions had no impact on the results of the group for the current
period.
Had the acquisition of the acquired franchisees been effected at the beginning
of the period, the revenue of the group for the 26 weeks ended 26 December 2010
would have been R21m higher, and the profit after tax for the period would have
increased by R3m. The directors of the group consider these pro forma numbers to
represent an approximate measure of the performance of the combined group on a
half-yearly basis and to provide a reference point for comparison in future
periods.
12 Related party transactions
The group entered into related party transactions during the period. Information
regarding the related parties is included in the annual financial statements.
13 Events subsequent to the reporting date
No event material to the understanding of these financial statements has
occurred between the end of the financial period and the date of approval, that
have not been disclosed. See also note 11 with regards to acquisitions of
franchise stores.
14 Approval of annual financial statements
The interim financial statements were approved by the board of directors on 16
February 2011.
15 Unaudited results
These results have not been reviewed or audited.
Directorate and statutory information
Non-executive directors:
Buddy Hawton (Chairman), Simon Susman (Deputy chairman), Peter Bacon (British),
Tom Boardman, Lindiwe Bakoro, Mike Leeming, Chris Nissen, Sir Stuart Rose
(British), Thina Siwendu, Sindi Zilwa
Executive directors:
Ian Moir (Group CEO) (Australian), Zyda Rylands, Norman Thomson
Group secretary:
Cherrie Lowe
Share code: WHL ISIN: ZAE000063863
Registered address:
PO Box 680, Cape Town 8000
Woolworths House, 93 Longmarket Street, Cape Town 8001
Registration number:
1929/001986/06
JSE sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg 2001
visit our investor relations site: www.woolworthsholdings.co.za
Date: 17/02/2011 07:05:01 Supplied by www.sharenet.co.za
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