Wrap Text
WHL - Woolworths Holdings Limited - Unaudited interim group results for the 26
weeks ended 25 December 2011
Woolworths Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 1929/001986/06
Share code: WHL
ISIN: ZAE000063863
("the group" or "the company")
UNAUDITED INTERIM GROUP RESULTS FOR THE 26 WEEKS ENDED 25 DECEMBER 2011
TURNOVER + 11. 4%
PROFIT BEFORE TAX + 26.8%
HEADLINE EARNINGS PER SHARE + 34.6%
Group sales for the period grew 11.4% with stronger growth in the second
quarter, particularly over the festive season. Sales growth was leveraged by
improved gross margins and the favourable foreign exchange impact of a weaker
rand, delivering a profit before tax growth of 26.8%.
A lower effective tax rate and the benefit of recent share buy-backs further
advanced headline earnings per share 34.6% to 135.7 cents.
Strong cash generation from operations financed the higher investment in
working capital brought about mainly due to the conversion of former franchise
stores. Return on equity increased from 44.9% to 50.8% (excluding unrealised
foreign exchange movements) as a result of the share buy-back programme and
improved returns in the core businesses.
Woolworths
Food sales grew ahead of the market at 11.7%, with comparable store sales up
8.4% and price movement of 4.8%. Gross profit margins improved from 24.2% to
25.2% and profit before tax for the segment grew 18.5%. Return on sales was
5.6%, up from 5.3% in the prior period.
Clothing and General Merchandise sales grew 10.1%, with price movement of 7%.
Clothing sales including Country Road`s South African operations grew 11.2%,
with sales in comparable stores up 5.9%. Gross profit margins also improved in
the Clothing and General Merchandise segment from 42.9% to 44.3%. Excluding
the positive impact of unrealised foreign exchange movements, profit before
tax grew 15.1%, and return on sales was 17.0%, up from 16.3% in the prior
period.
Store costs were up 16% largely due to the addition of 12% more space,
including the conversion of franchise stores. Other operating costs, excluding
the positive impact of the unrealised foreign exchange movements, grew at 9%.
Woolworths retail space, including Africa but excluding franchise conversions,
grew by 2.3%, net of closures. Franchise conversions remain on track with 50
stores now converted and a further nine to be converted during the second
half.
Country Road
Country Road`s total sales contracted 2.4% in Australian dollar terms, with
Australian sales continuing to struggle amidst difficult trading conditions,
falling 5.5% in comparable stores. However, gross margins have improved and
costs remain tightly controlled, resulting in an increase in profit before tax
in Australian dollars, which, as a result of the weaker rand, translates to a
27.2% increase in profit. Return on sales at 6.4%, was up from 5.8% in the
prior period. Return on equity declined from 22.6% to 19.2%.
Woolworths Financial Services
The overall book growth was 6.7% up on the prior period with net impairments
increasing just 0.1% to 1.7%. Net interest income was impacted by lower
yields, increasing by only 2.6% on the prior period. Costs excluding
impairments were 10.8% up on the previous year impacted by further investments
in fraud prevention, compliance and growth capacity. As a consequence, profit
before tax was 10.4% below the previous period and the return on equity
declined from 23.4% to 20.5%.
Outlook
We believe that economic conditions in South Africa will remain constrained.
However, trading for the first six weeks of the second half of the financial
year has been positive, and we expect sales growth to be broadly in line with
the first half.
In Australia we expect the current competitive retail environment to continue
and sales for the second half to be in line with the first half performance.
Any reference to future financial performance included in this statement has
not been reviewed and reported on by the company`s external auditors and does
not constitute an earnings forecast.
Changes to the Board of Directors
After serving nine years as chairman, Buddy Hawton retired from the board at
the company`s annual general meeting on 17 November 2011. The board expresses
its deep gratitude to Buddy for his wisdom and guidance. On the same date,
Simon Susman was appointed as chairman, Tom Boardman was appointed as the lead
independent director and Zarina Bassa was appointed a non-executive director.
Changes to Group Secretary
Cherrie Lowe resigned as group secretary on 31 January 2012. Thobeka Sishuba-
Mashego was appointed as group secretary effective 1 February 2012.
S N Susman I Moir
Chairman Group chief executive officer
Cape Town, 15 February 2012
Dividend Declaration
Due to transitional rules relating to the phasing out of STC and its
replacement with the new Dividends Tax, the board has decided to defer the
declaration of an interim dividend until after 1 April 2012, but as soon as
reasonably possible thereafter. It is anticipated that the group`s full year
dividend cover policy, previously 1.5 times headline earnings per share, will
be adjusted for the impact of the new tax, resulting in a lower dividend cover
ratio.
Thobeka Sishuba-Mashego
Group secretary,
Cape Town, 15 February 2012
Directorate and Statutory Information
Non-executive Directors:
Simon Susman (Chairman), Peter Bacon (British),
Zarina Bassa, Lindiwe Bakoro, Tom Boardman,
Mike Leeming, Chris Nissen, Stuart Rose (British),
Thina Siwendu, Sindi Zilwa
Executive Directors:
Ian Moir (Group chief executive officer)
(Australian), Zyda Rylands, Norman Thomson
Group Secretary:
Thobeka Sishuba-Mashego
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
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 weeks
to 26 Jun
2011
Notes Rm
Revenue 25 841
Turnover 25 582
Cost of sales 16 683
Gross profit 8 899
Other revenue 127
Expenses 6 904
Store costs 4 448
Other operating costs 2 456
Operating profit 2 122
Investment income 132
Finance costs 84
Profit before earnings from joint ventures
and associate 2 170
Earnings from joint ventures 129
Earnings from associate 7
Profit before tax 2 306
Tax 659
Profit after tax 1 647
Other comprehensive income:
Net fair value adjustments on financial
instruments, after tax (17)
Exchange differences on translation
of foreign subsidiaries 37
Other comprehensive income for the period, net of tax 20
Total comprehensive income for the period 1 667
Profit attributable to: 1 647
Shareholders of the parent 1 631
Non-controlling interest 16
Total comprehensive income attributable to: 1 667
Shareholders of the parent 1 651
Non-controlling interest 16
Reconciliation of headline earnings
Earnings attributable to shareholders of the parent 1 631
BEE preference dividend paid 19
Basic earnings 1 612
Loss on disposal of property, plant and equipment 4
Impairment of property, plant and equipment 24
Tax impact of adjustments (8)
Headline earnings 1 632
Headline earnings per share (cents) 214.9
Earnings per share (cents) 2 212.2
Diluted headline earnings per share (cents) 209.8
Diluted earnings per share (cents) 2 207.2
Number of shares in issue (millions) 755.2
Weighted average number of shares
in issue (millions) 759.5
26 weeks 26 weeks
to 25 Dec to 26 Dec
2011 2010 %
Notes Rm Rm change
Revenue 14 214 12 797 11.1
Turnover 14 137 12 687 11.4
Cost of sales 9 090 8 327 9.2
Gross profit 5 047 4 360 15.8
Other revenue 42 46 (8.7)
Expenses 3 681 3 304 11.4
Store costs 2 534 2 166 17.0
Other operating costs 1 147 1 138 0.8
Operating profit 1 408 1 102 27.8
Investment income 35 64 (45.3)
Finance costs 19 64 (70.3)
Profit before earnings from joint ventures
and associate 1 424 1 102 29.2
Earnings from joint ventures 56 65 (13.8)
Earnings from associate - -
Profit before tax 1 480 1 167 26.8
Tax 431 384 12.2
Profit after tax 1 049 783 34.0
Other comprehensive income:
Net fair value adjustments on financial
instruments, after tax 141 (46) (>100)
Exchange differences on translation
of foreign subsidiaries 3 (6) (>100)
Other comprehensive income for
the period, net of tax 144 (52) (>100)
Total comprehensive income for the period 1 193 731 63.2
Profit attributable to: 1 049 783 34.0
Shareholders of the parent 1 034 775 33.4
Non-controlling interest 15 8 87.5
Total comprehensive income
attributable to: 1 193 731 63.2
Shareholders of the parent 1 179 731 61.3
Non-controlling interest 14 -
Reconciliation of headline earnings
Earnings attributable to shareholders
of the parent 1 034 775 33.4
BEE preference dividend paid 21 11 90.9
Basic earnings 1 013 764 32.6
Loss on disposal of property, plant
and equipment 2 1 100.0
Impairment of property, plant and equipment - -
Tax impact of adjustments (1) -
Headline earnings 1 014 765 32.5
Headline earnings per share (cents) 135.7 100.8 34.6
Earnings per share (cents) 2 135.5 100.6 34.7
Diluted headline earnings per
share (cents) 131.3 96.6 35.9
Diluted earnings per share (cents) 2 131.2 96.5 36.0
Number of shares in issue (millions) 745.9 761.7 (2.1)
Weighted average number of shares
in issue (millions) 747.4 759.3 (1.6)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
52 weeks
to 26 Jun
2011
Notes Rm
Interest at the beginning
of the period 3 453
Movements for the period:
Issue of shares 5 33
Shares repurchased 5 (339)
Share repurchase costs (1)
Distributions to shareholders (923)
Share-based payments 186
Business acquisitions 17
Total comprehensive income
for the period 1 667
Interest at the end of the period 4 093
Distribution per ordinary share (cents) 143.5
Distribution cover (based on headline
earnings per share) 1.5
Distribution per preference share (cents) 61.4
Share - Non -
holders of controlling
the parent interest
Notes Rm Rm
Interest at the beginning
of the period 4 008 85
Movements for the period:
Issue of shares 5 - -
Shares repurchased 5 (614) -
Share repurchase costs (2) -
Distributions to shareholders (719) -
Share-based payments 52 -
Business acquisitions - -
Total comprehensive income
for the period 1 179 14
Interest at the end of the period 3 904 99
Distribution per ordinary share (cents)
Distribution cover (based on headline
earnings per share)
Distribution per preference share (cents)
Total Total
26 weeks 26 weeks
to 25 Dec to 26 Dec
2011 2010
Rm Rm
Interest at the beginning
of the period 4 093 3 453
Movements for the period:
Issue of shares - 28
Shares repurchased (614) (21)
Share repurchase costs (2) -
Distributions to shareholders (719) (523)
Share-based payments 52 58
Business acquisitions - -
Total comprehensive income
for the period 1 193 731
Interest at the end of the period 4 003 3 726
Distribution per ordinary share (cents) - 50.5
Distribution cover (based on headline earnings
per share) - 2.0
Distribution per preference share (cents) - 16.8
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At
26 Jun
2011
Notes Rm
ASSETS
Non-current assets 4 115
Property, plant and equipment 3 2 046
Investment properties 121
Intangible assets 3 693
Investment in associate 46
Investment in joint ventures 578
Prepaid employment costs 23
Participation in export partnerships 59
Other loans 84
Derivative financial instruments -
Deferred tax 465
Current assets 4 950
Inventories 1 892
Trade and other receivables 733
Derivative financial instruments 10
Tax 22
Cash 2 293
Total assets 9 065
EQUITY AND LIABILITIES
Capital and reserves 4 093
Interest of shareholders of the parent 4 008
Non-controlling interest 85
Non-current liabilities 1 460
Interest - bearing borrowings 514
Operating lease accrual 455
Derivative financial instruments -
Post-retirement medical benefit liability 315
Deferred tax 176
Current liabilities 3 512
Trade and other payables 3 148
Provisions 269
Derivative financial instruments 78
Tax 1
Interest-bearing borrowings 16
Total equity and liabilities 9 065
Net asset book value - per share (cents) 531
GROUP ANALYSIS
Total assets 9 065
Woolworths Retail 5 719
Country Road 986
Treasury 1 783
Woolworths Financial Services 577
Inventories 1 892
Woolworths Retail 1 547
Country Road 345
Approved commitment for capital expenditure 934
Woolworths Retail 809
Country Road 125
Approved commitment for franchise acquisitions 9 384
At At
25 Dec 26 Dec
2011 2010
Notes Rm Rm
ASSETS
Non-current assets 4 333 3 679
Property, plant and equipment 3 2 134 2 020
Investment properties 121 121
Intangible assets 3 992 440
Investment in associate 45 39
Investment in joint ventures 580 589
Prepaid employment costs 20 23
Participation in export partnerships 55 61
Other loans 55 85
Derivative financial instruments 1 -
Deferred tax 330 301
Current assets 4 885 5 073
Inventories 2 271 1 837
Trade and other receivables 771 812
Derivative financial instruments 67 1
Tax 1 10
Cash 1 775 2 413
Total assets 9 218 8 752
EQUITY AND LIABILITIES
Capital and reserves 4 003 3 726
Interest of shareholders of the parent 3 904 3 669
Non-controlling interest 99 57
Non-current liabilities 919 1 300
Interest-bearing borrowings 24 511
Operating lease accrual 458 461
Derivative financial instruments - 1
Post-retirement medical benefit liability 327 303
Deferred tax 110 24
Current liabilities 4 296 3 726
Trade and other payables 3 246 3 012
Provisions 307 248
Derivative financial instruments 7 118
Tax 228 328
Interest-bearing borrowings 508 20
Total equity and liabilities 9 218 8 752
Net asset book value-per share (cents) 523 4 82
GROUP ANALYSIS
Total assets 9 218 8 752
Woolworths Retail 6 571 5 322
Country Road 1 128 1 038
Treasury 940 1 804
Woolworths Financial Services 579 588
Inventories 2 271 1 837
Woolworths Retail 1 932 1 514
Country Road 339 323
Approved commitment for capital expenditure 592 399
Woolworths Retail 488 373
Country Road 104 26
Approved commitment for franchise acquisitions 9 122 -
CONSOLIDATED STATEMENT OF CASH FLOWS
52 weeks
to 26 Jun
2011
Notes Rm
Cash flow from operating activities
Cash inflow from trading 2 848
Working capital movements 377
Cash generated by operating activities 3 225
Investment income 123
Finance costs (95)
Tax paid (985)
Cash generated by operations 2 268
Dividends received from associate 1
Dividends received from joint venture 125
Distributions to shareholders (923)
Net cash inflow from operating activities 1 471
Cash flow from investing activities
Net investment in PPE and intangible assets (585)
Acquisition of franchise operations 4 (207)
Other 21
Net cash outflow from investing activities (771)
Cash flow from financing activities
Shares issued 33
Shares repurchased (339)
Share repurchase costs (1)
Finance lease payments (18)
Short-term borrowings repaid (1 020)
Acquisitions-non-controlling interest contribution 17
Net cash outflow from financing activities (1 328)
Decrease in cash and cash equivalents (628)
Cash and cash equivalents at the beginning of the period 2 917
Effect of foreign exchange rate changes 4
Cash and cash equivalents at the end of the period 2 293
GROUP ANALYSIS
Cash inflow from trading 2 848
Woolworths Retail 2 586
Country Road 262
Gross capital expenditure 624
Woolworths Retail 517
Country Road 107
26 weeks 26 weeks
to 25 Dec to 26 Dec
2011 2010
Notes Rm Rm
Cash flow from operating activities
Cash inflow from trading 1 637 1 443
Working capital movements (129) 223
Cash generated by operating activities 1 508 1 666
Investment income 31 64
Finance costs (19) (74)
Tax paid (61) (384)
Cash generated by operations 1 459 1 272
Dividends received from associate - 1
Dividends received from joint venture 55 50
Distributions to shareholders (719) (523)
Net cash inflow from operating activities 795 800
Cash flow from investing activities
Net investment in PPE and intangible assets (361) (303)
Acquisition of franchise operations 4 (304) -
Other 36 18
Net cash outflow from investing activities (629) (285)
Cash flow from financing activities
Shares issued - 28
Shares repurchased (614) (21)
Share repurchase costs (2) -
Finance lease payments (11) (8)
Short-term borrowings repaid - (1 000)
Acquisitions-non-controlling interest
contribution - -
Net cash outflow from financing activities (627) (1 001)
Decrease in cash and cash equivalents (461) (486)
Cash and cash equivalents at the beginning
of the period 2 293 2 917
Effect of foreign exchange rate changes (57) (18)
Cash and cash equivalents at the end of the period 1 775 2 413
GROUP ANALYSIS
Cash inflow from trading 1 637 1 443
Woolworths Retail 1 429 1 306
Country Road 208 137
Gross capital expenditure 383 310
Woolworths Retail 343 264
Country Road 40 46
SEGMENTAL ANALYSIS
52 weeks
to 26 Jun
2011
Rm
Revenue
Turnover 25 582
Woolworths Retail 22 609
Clothing and General Merchandise 8 591
Food 13 535
Logistics 483
Country Road 2 973
Other revenue and investment income 259
Woolworths Retail 103
Clothing and General Merchandise 25
Food 78
Country Road 27
Treasury 129
Total group 25 841
Gross profit
Woolworths Retail 7 134
Clothing and General Merchandise 3 751
Food 3 298
Intra - group 85
Country Road 1 765
Total group 8 899
Profit before tax
Woolworths Retail 1 965
Clothing and General Merchandise 1 318
Food 647
Country Road 162
Woolworths Financial Services 129
Treasury 50
Total group 2 306
26 weeks 26 weeks
to 25 Dec to 26 Dec
2011 2010 %
Rm Rm change
Revenue
Turnover 14 137 12 687 11.4
Woolworths Retail 12 383 11 155 11.0
Clothing and General Merchandise 4 713 4 282 10.1
Food 7 415 6 635 11.8
Logistics 255 238 7.1
Country Road 1 754 1 532 14.5
Other revenue and investment income 77 110 (30.0)
Woolworths Retail 38 41 (7.3)
Clothing and General Merchandise 5 8 (37.5)
Food 33 33 -
Country Road 5 5 -
Treasury 34 64 (46.9)
Total group 14 214 12 797 11.1
Gross profit
Woolworths Retail 4 001 3 487 14.7
Clothing and General Merchandise 2 088 1 839 13.5
Food 1 867 1 606 16.3
Intra-group 46 42 9.5
Country Road 1 046 873 19.8
Total group 5 047 4 360 15.8
Profit before tax
Woolworths Retail 1 289 1 008 27.9
Clothing and General Merchandise 873 657 32.9
Food 416 351 18.5
Country Road 117 92 27.2
Woolworths Financial Services 56 65 (13.8)
Treasury 18 2 >100
Total group 1 480 1 167 26.8
NOTES
1 Basis of preparation
The abridged group financial statements comply with IAS 34 - Interim Financial
Reporting.
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 (No. 71 of 2008, as
amended).
2 Earnings per share
The difference between earnings per share and diluted earnings per share is
due to the impact of unexercised options under the group`s share incentive
schemes.
3 Property, plant and equipment and intangible assets
During the 26 weeks to 25 December 2011, the group acquired property, plant
and equipment at a cost of R331m (2010: R221m) and acquired intangible assets
(including goodwill and reacquired rights) at a cost of R358m (2010: R144m).
4 Acquisition of franchise operations
The group continues to wind down its South African franchise operations,
acquiring 25 stores in the current period.
Fair value of assets acquired at the date of acquisition Rm
Property, plant and equipment 10
Reacquired rights 193
Deferred tax liability (55)
Goodwill arising on acquisition 113
Consideration 261
Accrual - prior period 43
Cash outflow 304
The goodwill of R113m is supported by the growth and synergies expected to
accrue from the acquisitions.
From the dates of acquisition, these 25 franchise stores have contributed an
additional R79m of revenue and R41m of profit before tax to the group.
The directors consider that, on a pro-forma basis, had the acquisition of the
acquired franchisees been effective from the beginning of the period, the
revenue of the group for the period would have been R118m higher, and profit
before tax would have been R62m higher.
5 Issue and repurchase of shares
9 298 259 (2010: 851 827) shares totalling R285m (2010: R21m) were repurchased
from the market.
8 836 665 (2010: Nil) shares totalling R329m (2010: Nil) were purchased from
the market in the current period and allocated to employees on settlement of
share-based payments.
In the prior period, 3 500 331 ordinary shares totalling R28m were issued in
terms of the group`s executive incentive schemes.
6 Contingent liabilities
Group companies are party to legal disputes and investigations that have
arisen in the ordinary course of business. Whilst the outcome of these matters
cannot readily be foreseen, the directors do not expect them to have any
material financial effects.
7 Borrowing facilities
Unutilised banking facilities amount to R2 607m (2010: R2 463m). There is no
limit in the Memorandum of Incorporation on the group`s authority to raise
interest-bearing debt.
8 Related party transactions
The group entered into related party transactions during the period, the
substance of which are similar to those explained in the group`s 2011
Integrated Report.
9 Events subsequent to the reporting date
Agreements to purchase a further 9 franchise stores totalling R122m are
effective from dates subsequent to this report.
10 Approval of interim financial statements
The interim financial statements were approved by the board of directors on 15
February 2012.
11 Unaudited results
These results have not been reviewed or audited. These summary financial
statements have been prepared under the supervision of the group finance
director, Norman Thomson CA(SA).
visit our investor relations site: www.woolworthsholdings.co.za
Date: 16/02/2012 07:05:02 Supplied by www.sharenet.co.za
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