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WHL - Woolworths Holdings Limited - Abridged audited group results for the year
ended 26 June 2011 and cash dividend declaration
WOOLWORTHS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1929/001986/06
Share code: WHL
ISIN: ZAE000063863
ABRIDGED AUDITED GROUP RESULTS FOR THE YEAR ENDED 26 JUNE 2011 AND CASH
DIVIDEND DECLARATION
HIGHLIGHTS
- TURNOVER UP 9.4%
- PROFIT BEFORE TAX UP 31.1%
- HEADLINE EARNINGS PER SHARE UP 30.6%
- ADJUSTED HEADLINE EARNINGS PER SHARE UP 36.7%
- RETURN ON EQUITY INCREASED FROM 39.4% TO 44.1%
- DIVIDEND PER SHARE UP 36.7%
- CONTINUED MARKET SHARE GAINS
COMMENTARY
GROUP RESULTS
The group had an excellent year with turnover up 9.4% compared to the prior
year and profit before tax and adjusted headline earnings per share up 31.1%
and 36.7% respectively.
The group`s return on equity increased from 39.4% to 44.1%. Shares to the value
of R339m were repurchased during the year and since the year end shares to the
value of a further R275m have been repurchased.
A final dividend of 93.0 cents per share has been declared taking the total
distribution to 143.5 cents, an increase of 36.7% on the prior year.
WOOLWORTHS
During the course of the year sales grew by 10.0% (comparable 7.9%).
Clothing and General merchandise sales grew by 8.6% (comparable 7.3%). Clothing
and Footwear sales in South Africa performed particularly well increasing by
11.5% (comparable 9.4%).
On a 12 month moving average basis, Clothing and Footwear sales grew at 10.6%
compared to a market growth of 9.5%.
General merchandise sales decreased by 2.7% following our decision to
rationalise the unprofitable cellular handset business. Excluding this, sales
grew by 5.2%.
Strong margin improvement in the Clothing and General merchandise business
(40.0% to 43.7%) resulted in a return on sales of 15.3% against 12.3% last
year.
Food also experienced strong growth for the year with sales up 10.7% (8.4%
comparable). On average for the 12 month period Woolworths outperformed the
market by 4.1%.
The return on sales in the Food business increased from 3.8% to 4.8% primarily
due to improved sourcing.
Corporate retail space grew by 7.6%, which included franchise conversions which
largely occurred towards the end of the year.
Franchise
During the year the group made an offer to its franchisees to purchase their
rights and stores and convert them to company owned and operated stores.
At the year end 23 stores had been acquired at a cost of R250m. Since the
year end a further 31 stores have been acquired at a cost of R384m.
COUNTRY ROAD
Sales were a disappointing 1.2% up on the previous year (comparable down 8.6%).
Sales in Australia were 2% down (comparable down 10.9%) reflecting the very
challenging trading conditions in that country offset by an increase of 24% in
South Africa (comparable 7.9%) where the Country Road and Trenery brands
continue to perform well.
Costs were well managed and better sourcing and a strong Australian dollar
resulted in operating margin improving from 5.2% to 5.6%.
Profit for the year under review was 9.5% up on the previous year.
WOOLWORTHS FINANCIAL SERVICES
The joint venture with ABSA performed well with operating profit up 82.3%
compared to the prior year. The quality of the debtors book has improved
significantly with the impairment charge expressed as a percentage of gross
receivables reducing from 5.1% to 1.4%.
The overall debtors book increased by 4.8% over the prior year and the return
on equity increased from 13.9% to 23.5% as a result of the lower impairment
charge.
OUTLOOK
The economic challenges facing the United States and the Eurozone are likely
to have a negative impact on the rate of growth of the South African economy
and in particular consumer confidence. It is expected therefore that trading
conditions will be tougher in the second half of the year. The group will
however continue to benefit from improved sourcing, tight cost control as well
as the full year integration of the franchise stores.
CHANGES TO THE BOARD OF DIRECTORS
Buddy Hawton, having served nine years as Chairman, has indicated his intention
to retire from the board after the annual general meeting in November 2011.
The board has elected to appoint Simon Susman, currently Deputy chairman, as
Chairman following Mr Hawton`s retirement. The role of Deputy chairman will
then cease to exist.
As Mr Susman held the role of Chief executive officer within the prior three
year period and holds a significant number of shares, he will, in line with the
recommendations of King III, be classified as a non-independent Chairman.
The board has consequently appointed a Lead independent director to act in cases
where the Chairman is conflicted. Tom Boardman has been appointed to this role.
These appointments will be effective from after the annual general meeting
on
17 November 2011.
The board wishes to express its deep thanks to Mr Hawton for the significant
contribution that he has made to the company.
DA Hawton I Moir
Chairman Group chief executive officer
Cape Town, 24 August 2011
DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a final cash dividend
of 93.0 cents per ordinary share for the year ended 26 June 2011.
The salient dates for the dividend will be as follows:
Last day to trade to receive a dividend Friday, 9 September 2011
Shares commence trading "ex" dividend Monday, 12 September 2011
Record date Friday, 16 September 2011
Payment date Monday, 19 September 2011
Share certificates may not be dematerialised or rematerialised between Monday,
12 September 2011 and Friday, 16 September 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.
A final cash dividend of 44.6 cents per preference share for the year ended
26 June 2011 will be paid to the beneficiaries of the Woolworths Employee Share
Ownership Scheme on Monday, 19 September 2011.
CL Lowe
Group secretary
Cape Town, 24 August 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Restated
52 weeks 52 weeks
to to
26 June 27 June
2011 2010 %
Notes Rm Rm change
Revenue 25 841 23 663 9.2
Turnover 25 582 23 393 9.4
Cost of sales 3.1 16 683 15 619 6.8
Gross profit 8 899 7 774 14.5
Other revenue 127 95 33.7
Expenses 6 904 6 215 11.1
Store costs 4 448 3 988 11.5
Other operating costs 3.1 2 456 2 227 10.3
Operating profit 2 122 1 654 28.3
Investment income 132 175 (24.6)
Finance costs 84 151 (44.4)
Profit before earnings from joint
ventures and associate 2 170 1 678 29.3
Earnings from joint ventures 129 75 72.0
Earnings from associate 7 6 16.7
Profit before tax 2 306 1 759 31.1
Tax 659 491 34.2
Profit after tax 1 647 1 268 29.9
Other comprehensive income:
Net fair value adjustments on
financial instruments, after tax (17) 40 <100
Exchange differences on translation
of foreign subsidiaries 37 13 >100
Other comprehensive income for the
year, net of tax 20 53 (62.3)
Total comprehensive income for the year 1 667 1 321 26.2
Profit attributable to: 1 647 1 268 29.9
Shareholders of the parent 1 631 1 258 29.7
Non-controlling interest 16 10 60.0
Total comprehensive income attributable to: 1 667 1 321 26.2
Shareholders of the parent 1 651 1 304 26.6
Non-controlling interest 16 17 (5.9)
Reconciliation of headline earnings
Earnings attributable to
shareholders of the parent 1 631 1 258 29.7
BEE preference dividend paid 19 11 72.7
Basic earnings 1 612 1 247 29.3
Loss on disposal of property, plant
and equipment 4 24 (83.3)
Impairment of property, plant and
equipment 24 -
Tax impact of adjustments (8) (7) 14.3
Headline earnings 1 632 1 264 29.1
Abnormal foreign exchange related gain - (57) (100.0)
Adjusted headline earnings 1 632 1 207 35.2
Headline earnings per share (cents) 214.9 164.6 30.6
Earnings per share (cents) 5 212.2 162.4 30.7
Adjusted headline earnings per
share (cents) 214.9 157.2 36.7
Diluted headline earnings per share
(cents) 209.8 159.3 31.7
Diluted earnings per share (cents) 5 207.2 157.2 31.8
Adjusted diluted headline earnings
per share (cents) 209.8 152.2 37.8
Number of shares in issue (millions) 755.2 759.5 (0.6)
Weighted average number of shares
in issue (millions) 759.5 768.0 (1.1)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
26 June 27 June
2011 2010
Notes Rm Rm
ASSETS
Non-current assets 4 115 3 633
Property, plant and equipment 6 2 046 1 991
Investment properties 121 121
Intangible assets 6 693 392
Investment in associate 46 40
Investment in joint ventures 578 574
Prepaid employment costs 23 29
Participation in export partnerships 59 63
Other loans 84 95
Derivative financial instruments - 1
Deferred tax 465 327
Current assets 4 950 5 377
Inventories 1 892 1 676
Trade and other receivables 733 759
Derivative financial instruments 10 19
Tax 22 6
Cash 2 293 2 917
Total assets 9 065 9 010
EQUITY AND LIABILITIES
Capital and reserves 4 093 3 453
Interest of shareholders of the parent 4 008 3 396
Non-controlling interest 85 57
Non-current liabilities 1 460 1 362
Interest-bearing borrowings 514 521
Operating lease accrual 455 447
Derivative financial instruments - 15
Post-retirement medical benefit liability 315 292
Deferred tax 176 87
Current liabilities 3 512 4 195
Trade and other payables 3 148 2 608
Provisions 269 248
Derivative financial instruments 78 20
Tax 1 285
Interest-bearing borrowings 16 1 034
Total equity and liabilities 9 065 9 010
Net asset book value - per share (cents) 531 447
GROUP ANALYSIS Restated
Total assets 9 065 9 010
Woolworths Retail 5 719 5 145
Country Road 986 850
Treasury 1 783 2 442
Woolworths Financial Services 577 573
Inventories 1 892 1 676
Woolworths Retail 1 547 1 354
Country Road 345 322
Approved commitment for capital expenditure 934 786
Woolworths Retail 809 652
Country Road 125 134
Approved commitment for franchise acquisitions 12 384 -
CONSOLIDATED STATEMENT OF CASH FLOWS
52 weeks 52 weeks
to to
26 June 27 June
2011 2010
Rm Rm
Cash flow from operating activities
Cash inflow from trading 2 848 2 210
Working capital movements 377 215
Cash generated by operating activities 3 225 2 425
Investment income 123 167
Finance costs (95) (152)
Tax paid (985) (367)
Cash generated by operations 2 268 2 073
Dividends received from associate 1 1
Dividends received from joint venture 125 35
Distributions to shareholders (923) (725)
Net cash inflow from operating activities 1 471 1 384
Cash flow from investing activities
Net investment in PPE and intangible assets (585) (543)
Acquisition of franchise operations (207) -
Other 21 39
Net cash outflow from investing activities (771) (504)
Cash flow from financing activities
Shares issued 33 47
Shares repurchased (339) (410)
Share repurchase costs (1) (1)
Finance lease payments (18) (20)
Short-term borrowings (repaid)/raised (1 020) 20
Acquisitions - non-controlling interest contribution 17 -
Net cash outflow from financing activities (1 328) (364)
(Decrease)/ Increase in cash and cash equivalents (628) 516
Cash and cash equivalents at the beginning of the year 2 917 2 391
Effect of foreign exchange rate changes 4 10
Cash and cash equivalents at the end of the year 2 293 2 917
GROUP ANALYSIS Restated
Cash inflow from trading 2 848 2 210
Woolworths Retail 2 586 1 986
Country Road 262 224
Gross capital expenditure 624 607
Woolworths Retail 517 460
Country Road 107 147
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-
holders Non-
of the controlling
parent interest
Notes Rm Rm
Interest at the beginning of the year 3 396 57
Movements for the year:
Issue of shares 8 33 -
Shares repurchased 8 (339) -
Share repurchase costs (1) -
Distributions to shareholders (918) (5)
Share-based payments 186 -
Business acquisitions - 17
Total comprehensive
income for the year 1 651 16
Interest at the end of the year 4 008 85
Distribution per ordinary share (cents)
Distribution cover (based on headline earnings
per share)
Distribution per preference share (cents)
Total Total
52 weeks 52 weeks
to to
26 June 27 June
2011 2010
Rm Rm
Interest at the beginning of the year 3 453 3 072
Movements for the year:
Issue of shares 33 47
Shares repurchased (339) (410)
Share repurchase costs (1) (1)
Distributions to shareholders (923) (725)
Share-based payments 186 149
Business acquisitions 17 -
Total comprehensive income for the year 1 667 1 321
Interest at the end of the year 4 093 3 453
Distribution per ordinary share (cents) 143.5 105.0
Distribution cover (based on headline earnings
per share) 1.5 1.5
Distribution per preference share (cents) 61.4 30.8
SEGMENTAL ANALYSIS
Restated
52 weeks 52 weeks
to to
26 June 27 June
2011 2010 %
Notes Rm Rm change
Revenue
Turnover 25 582 23 393 9.4
Woolworths Retail 22 609 20 557 10.0
Clothing and General merchandise 3.2 8 591 7 913 8.6
Food 13 535 12 227 10.7
Logistics 483 417 15.8
Country Road 3.2 2 973 2 836 4.8
Other revenue and investment income 259 270 (4.1)
Woolworths Retail 103 86 19.8
Clothing and General merchandise 3.2 25 21 19.0
Food 78 65 20.0
Country Road 3.2 27 25 8.0
Treasury 129 175 (26.3)
Intra-group revenue - (16) (100.0)
Total group 25 841 23 663 9.2
Gross profit
Woolworths Retail 7 134 6 192 15.2
Clothing and General merchandise 3.2 3 751 3 164 18.6
Abnormal foreign exchange related gain - 79 (100.0)
Food 3 298 2 872 14.8
Intra-group 85 77 10.4
Country Road 3.2 1 765 1 582 11.6
Total group 8 899 7 774 14.5
Profit before tax
Woolworths Retail 1 965 1 514 29.8
Clothing and General merchandise 3.2 1 318 971 35.7
Abnormal foreign exchange related gain - 79 (100.0)
Food 647 464 39.4
Country Road 3.2 162 142 14.1
Woolworths Financial Services 129 75 72.0
Treasury 50 28 78.6
Total group 2 306 1 759 31.1
NOTES
1 Basis of preparation
The abridged group financial statements comply with IAS 34 Interim Financial
Reporting. These abridged group financial statements do not contain all the
information and disclosures required in the annual financial statements.
Accounting policies used in the abridged group financial statements are the
same as those used to prepare the group annual financial statements, which
have been prepared in compliance with International Financial Reporting
Standards (IFRS) and the South African Companies Act (71 of 2008, as amended).
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 27 June 2010, except for the adoption of the following IFRS, IFRIC
interpretations, amendments and circulars that became effective during the
current year. 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 (Revised) - Share-based Payment: Group Cash-settled share based
payment arrangements
- IFRS 3 (Revised) - Business Combinations
3 Reclassification of comparative figures
3.1 Marketing expenses of R37m previously disclosed in cost of sales have
been included in other operating costs.
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.
These reclassifications have had no impact on the group operating profit.
4 Segmental analysis
To increase transparency and comparability of revenue, the group has included
additional voluntary disclosure of revenue from logistics services.
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.
6 Property, plant and equipment and intangible assets
During the financial year, the group acquired property, plant and equipment
with a cost of R527m (2010: R500m) and acquired intangible assets (including
goodwill and reacquired rights) with a cost of R377m (2010: R107m).
7 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 expired on 26 June 2011. In line with this decision, the
group acquired 23 franchise stores for a cash consideration of R250m.
Period Stores Cost
27 September 2010 to
26 December 2010 7 50
27 December 2010 to
27 March 2011 6 68
27 March 2011 to
26 June 2011 10 132
23 250
Fair value of assets acquired at
the date of acquisition Rm
Property, plant and equipment 8
Reacquired rights 138
Deferred tax liability (39)
107
Goodwill arising on acquistion Rm
Consideration 250
Less: Fair value of identifiable net assets 107
143
From the dates of the acquisitions, the franchise stores have contributed
R171m of revenue and R26m to the profit before tax of the group.
Had the acquisition of the acquired franchisees been effected at the beginning
of the year, the revenue of the group for the 52 weeks ended 26 June 2011
would have been R345m higher and the profit before tax for the year would have
increased by R80m. The directors of the group consider these pro-forma numbers
to represent an approximate measure of the performance of the combined group
and to provide a reference point for comparison in future periods.
8 Issue and repurchase of shares
During the current financial year, 3 945 838 (2010: 6 172 402) ordinary
shares amounting to R33m (2010: R47m) were issued in terms of the group`s
executive share incentive scheme.
1 122 568 (2010: 4 061 222) shares amounting to R28m (2010: R87m) were
repurchased from the market by Woolworths (Proprietary) Limited and held as
treasury shares by the group. 7 056 052 (2010: nil) shares amounting to R193m
(2010: nil) were repurchased from the market and cancelled.
3 998 422 (2010: nil) shares amounting to R118m (2010: nil) were purchased
from the market in the current year and allocated to employees on settlement
of share-based payments.
In the prior year, 17 378 892 shares amounting to R323m were repurchased
from the market by E-Com (Proprietary) Limited and are held as treasury
shares by the group.
9 Contingent liabilities
There are no contingent liabilities.
10 Borrowing facilities
Unutilised banking facilities amount to R2 049m (2010: R2 443m). There is
no limit in the articles of association on the group`s authority to raise
interest-bearing debt.
11 Related party transactions
The group entered into related party transactions during the year. Information
regarding the related parties is included in the annual financial statements.
12 Events subsequent to the year-end
An additional 16 stores amounting to R155m have been purchased between the
year-end and the date of approval of the financial statements. The initial
accounting for these acquisitions are incomplete as at the date of this
report. Had the acquisition of the acquired franchisees been effected at the
beginning of the year, the revenue of the group for the 52 weeks ended 26
June 2011 would have been R123m higher, and the profit before tax for the
year would have increased by R49m.The directors of the group consider
these pro-forma numbers to represent an approximate measure of the
performance of the combined group and to provide a reference point for
comparison in future periods. Agreements to purchase a further 15 stores
amounting to R229m are effective from dates subsequent to this report.
13 Approval of annual financial statements
The annual financial statements were approved by the board of directors on
24 August 2011.
14 Audit opinion
These abridged consolidated group financial statements have been extracted
from the audited annual financial statements upon 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.
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 chief executive officer)(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: 25/08/2011 07:06:23 Supplied by www.sharenet.co.za
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