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Audited group results for the 52 weeks ended 25 June 2017, cash dividend declaration and board changes
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')
PRELIMINARY AUDITED GROUP RESULTS FOR THE 52 WEEKS ENDED 25 JUNE 2017,
CASH DIVIDEND DECLARATION AND CHANGES TO THE BOARD OF DIRECTORS
HIGHLIGHTS
Turnover and concession sales: +3.0% to R74.3 billion
Earnings per share: +24.8% to 566.7 cps
Headline earnings per share: -7.6% to 420.9 cps
Adjusted diluted headline earnings per share: -7.9% to 417.7 cps
Total dividend per share: Maintained at 313.0 cps
Return on equity: 20.8% from 25.6%
COMMENTARY
Group sales for the 52 weeks ended 25 June 2017 increased
by 3.0% to R74.3 billion. Growth in the second half was
impacted by increasingly difficult trading conditions in both
South Africa, heightened in the second half of the year
by political uncertainty, and in Australia, by weaker consumer
confidence.
Earnings per share, which includes the A$172.6 million
(R1 762 million) profit on disposal by David Jones of its Market
Street property in Sydney, increased by 24.8%. Headline
earnings per share (HEPS) and adjusted diluted HEPS, which
exclude the profit on disposal of assets as well as certain
other once-off items, declined by 7.6% and 7.9% respectively.
WOOLWORTHS
FOOD
Food sales increased by 8.6%, with growth well above the
market throughout the period. Comparable store sales grew
by 4.6%. Average price movement for the year was 8.4%.
Lower food inflation into the second half of the
year saw the return of increasingly positive volume growth.
Retail space also grew by a net 7.6% with the roll out of a net
11 new stores.
Gross profit increased by 6.7%, despite gross margin decreasing by
40 bps to 25.1%, as we continued to focus on price competitiveness.
Store costs increased by 9.3% as a result of the new space,
although cost growth in comparable stores was limited to 2.8%.
Other operating costs were 1.2% lower than last year.
Adjusted operating profit increased by 8.3% to R1 977 million.
CLOTHING AND GENERAL MERCHANDISE
Clothing and General Merchandise sales increased by 1.4%,
with price movement of 6.6%, whilst sales in comparable stores
declined by 0.9%. Retail space grew by a net 2.0%. Despite the
difficult trading conditions, we traded ahead of most other
apparel retailers and continued to build our fashion credibility
with a segmented, brand-directed customer experience. We are in the
process of rolling out our new beauty offering that will bring
international brands such as Chanel and Estee Lauder into our
stores for the first time.
Gross profit margin declined by 40 bps to 47.9%, impacted by
higher markdowns, as market conditions worsened. Given the
weaker sales environment, store costs were well controlled,
increasing by 5.8%, with comparable store cost growth
contained to 1.9%. Other operating costs were also well
controlled, decreasing by 0.2%. Adjusted operating profit
declined by 6.0% to R2 167 million.
WOOLWORTHS FINANCIAL SERVICES (WFS)
The Woolworths Financial Services debtors book grew by
3.3%, reflecting the tight credit environment and the impact
of new credit affordability assessment regulations on
both new and existing customer growth. The impairment rate
for the 12 months ended 30 June 2017 was an industry - leading
rate of 6.3% (2016: 5.7%).
DAVID JONES
David Jones sales increased by 1.0% in Australian dollar terms,
with the termination of the Dick Smith electronics concession
negatively impacting growth by 1.0%. Sales in comparable stores
(excluding the impact of Dick Smith) declined by 0.7%.
Retail space declined by a net 0.8%. Sales growth slowed
in the second half, as consumer sentiment worsened,
although our share of the department store and specialty
market grew marginally.
Gross profit margin declined by 90 bps to 37.0%, as a result
of higher markdowns in the promotion-driven environment.
Store costs (which included the impact of three new stores)
increased by 3.7%, whilst total expenses increased by 5.6%, reflecting
the investment in transformational initiatives. Adjusted operating
profit declined by 25.3% to A$127 million, while adjusted profit
before tax was 26.2% lower at A$124 million.
We have continued to drive the transformation of David Jones
and have achieved significant milestones on numerous key initiatives,
including the launch of a new Customer Relationship Management
programme, new Merchandise and Inventory Management
systems and the opening of a new David Jones Food concept
in Bondi Junction, Sydney.
COUNTRY ROAD GROUP
Country Road Group sales increased by 5.1% in Australian
dollar terms and showed a marked improvement in the second
half, including the newly-acquired Politix business, which added
3.7% to growth. Sales in comparable stores declined by 0.4% and
retail space declined by a net 1.9%. Country Road's above-market
performance reflects the changes we have made to the business over
the past 18 months and the ongoing improvements to ranges
during the year.
Gross profit margin increased by 90 bps to 60.3%, as a result of
sourcing gains and lower markdowns from better sell through
of the improved ranges. Costs, including those of Politix,
increased by 7.7%. Adjusted operating profit increased by
1.0% to A$98 million, whilst adjusted profit before tax was flat
on last year at A$95 million.
OUTLOOK
Market conditions in the year ahead are likely to be constrained by
the same economic and political conditions that impacted our performance
during the year under review. We will also continue to see more structural
change in both South Africa and Australia. We will continue to invest in
various transformational initiatives (most notably in David Jones) and remain
confident that our strategies will deliver future - fit businesses capable of
long-term profitable growth. We expect our food and clothing businesses in both
South Africa and Australia to continue to outperform their respective markets.
Trading for the first eight weeks of the new financial year
indicates no change to the recent conditions described above.
Any reference to future financial performance included in
this statement has not been reviewed and reported on by
the Group's external auditors, and does not constitute an
earnings forecast.
CHANGES TO THE BOARD OF DIRECTORS
As announced on the JSE Stock Exchange News Service on
22 May 2017, John Dixon was appointed as an Executive
Director of the company, with effect from 18 May 2017. The
Board further confirms the appointment of Nombulelo Moholi
as a member of the Sustainability Committee, with effect from
18 May 2017.
After serving over 11 years as a Non-executive Director,
member of the Audit and Remuneration Committees, and
trustee of the Woolworths Holdings Share Trust ('Trust'),
Peter Bacon will retire from the Board and Trust at the
conclusion of the November 2017 Annual General Meeting.
His contribution to the Group has been significant and the
Board expresses its gratitude to Peter and wishes him well
in his future endeavours.
S N Susman I Moir
Chairman Group Chief Executive Officer
Cape Town, 23 August 2017
DIVIDEND DECLARATION
Notice is hereby given that the Board of Directors have declared a final gross cash dividend per ordinary share (dividend)
of 180.0 cents (144.0 cents net of dividend withholding tax), thereby maintaining the total dividend for the 52 weeks ended 25 June 2017
to 313.0 cents, in line with last year. The dividend has been declared from income reserves and
therefore does not constitute a distribution of 'contributed tax capital' as defined in the Income Tax Act, 58 of 1962. A dividend
withholding tax of 20% will be applicable to all shareholders who are not exempt.
The issued share capital at the declaration date is 1 047 847 794 ordinary shares.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Tuesday, 12 September 2017
Shares commence trading 'ex' dividend Wednesday, 13 September 2017
Record date Friday, 15 September 2017
Payment date Monday, 18 September 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 13 September 2017 and Friday,
15 September 2017, both days inclusive. Ordinary shareholders who hold dematerialised shares will have their accounts
at their CSDP or broker credited or updated on Monday, 18 September 2017. Where applicable, dividends in respect of
certificated shares will be transferred electronically to shareholders' bank accounts on the payment date. In the absence
of specific mandates, dividend cheques will be posted to shareholders.
Chantel Reddiar
Group Company Secretary
Cape Town, 23 August 2017
PRELIMINARY AUDITED GROUP RESULTS
GROUP STATEMENT OF COMPREHENSIVE INCOME
52 weeks 52 weeks
to 25 Jun to 26 Jun
2017 2016 %
Notes Rm Rm change
Revenue 69 451 66 978 3.7
Turnover and concession sales 74 273 72 137 3.0
Concession sales (6 862) (7 133) (3.8)
Turnover 67 411 65 004 3.7
Cost of sales 40 739 38 618 5.5
Gross profit 26 672 26 386 1.1
Other revenue 1 944 1 926 0.9
Expenses 22 410 21 343 5.0
Store costs 16 233 15 640 3.8
Other operating costs 6 177 5 703 8.3
Operating profit 6 206 6 969 (10.9)
Profit on sale of property in Sydney, net of impairment 1 420 - -
Profit on sale of property 3 1 762 - -
Impairment due to sale of property 342 - -
Investment income 96 48 >100
Finance costs 1 256 1 234 1.8
Profit before earnings from joint ventures and associate 6 466 5 783 11.8
Earnings from joint ventures 260 249 4.4
Earnings from associate - 1 (100.0)
Profit before tax 6 726 6 033 11.5
Tax 1 278 1 680 (23.9)
Profit for the year 5 448 4 353 25.2
Other comprehensive income:
Amounts that may be reclassified to profit or loss
Fair value adjustments on financial instruments, after tax (123) (104)
Exchange differences on translation of foreign subsidiaries (3 087) 3 748
Amounts that may not be reclassified to profit or loss
Post-retirement medical benefit liability-actuarial gain, after tax 15 7
Other comprehensive income for the year (3 195) 3 651
Total comprehensive income for the year 2 253 8 004
Profit attributable to: 5 448 4 353
Shareholders of the parent 5 446 4 344
Non-controlling interests 2 9
Total comprehensive income attributable to: 2 253 8 004
Shareholders of the parent 2 251 7 988
Non-controlling interests 2 16
Reconciliation of headline earnings
Basic earnings attributable to shareholders of the parent 5 446 4 344 25.4
Net (profit)/loss on disposal of property, plant and equipment and intangible assets (1 752) 22
Profit on disposal of associate - (7)
Impairment of property, plant and equipment and intangible assets 382 7
Tax impact of adjustments (31) (8)
Headline earnings 4 045 4 358 (7.2)
Unrealised foreign exchange (gains)/losses (11) 13
Transaction, relocation and swap close-out costs 226 -
Tax impact of adjustments (60) (4)
Tax base adjustments on David Jones assets at acquisition (164) -
Adjusted headline earnings 4 036 4 367 (7.6)
Earnings per share (cents) 2 566.7 454.2 24.8
Headline earnings per share (cents) 420.9 455.6 (7.6)
Adjusted headline earnings per share (cents) 420.0 456.6 (8.0)
Diluted earnings per share (cents) 2 563.7 451.0 25.0
Diluted headline earnings per share (cents) 418.7 452.5 (7.5)
Adjusted diluted headline earnings per share (cents) 417.7 453.4 (7.9)
Number of shares in issue (millions) 961.7 960.1 0.2
Weighted average number of shares in issue (millions) 961.0 956.5 0.5
PRELIMINARY AUDITED GROUP RESULTS
GROUP STATEMENT OF FINANCIAL POSITION
Restated** Restated**
At At At
25 Jun 26 Jun 28 Jun
2017 2016 2015
Notes Rm Rm Rm
ASSETS
Non-current assets 34 706 37 978 33 736
Property, plant and equipment 3 13 846 15 324 14 430
Investment properties 3 - 78 78
Intangible assets 3 19 595 21 136 17 502
Investment in joint ventures and associate 1 015 978 894
Participation in export partnerships - 8 19
Fair value lease adjustment 65 83 76
Other loans 42 41 55
Derivative financial instruments 6 3 72 82
Deferred tax 140 258 600
Current assets 10 287 10 340 8 251
Inventories 6 990 7 117 5 881
Trade and other receivables 1 218 1 312 1 051
Derivative financial instruments 6 40 90 219
Tax 252 296 209
Cash and cash equivalents 1 787 1 525 891
Non-current assets held for sale 3 - 2 049 30
TOTAL ASSETS 44 993 50 367 42 017
EQUITY AND LIABILITIES
TOTAL EQUITY 19 066 19 853 14 297
Equity attributable to shareholders of the parent 19 038 19 826 14 251
Non-controlling interests 28 27 46
Non-current liabilities 15 336 19 536 18 634
Interest-bearing borrowings 12 137 15 703 14 922
Operating lease accrual and fair value lease adjustment 1 980 2 264 2 037
Post-retirement medical benefit liability 386 387 374
Provisions 156 187 197
Derivative financial instruments 6 19 12 26
Deferred tax 658 983 1 078
Current liabilities 10 591 10 978 9 086
Trade and other payables 8 262 9 107 7 699
Provisions 825 863 738
Operating lease accrual and fair value lease adjustment 114 135 122
Derivative financial instruments 6 176 265 72
Tax 26 393 259
Overdrafts and interest-bearing borrowings 1 188 215 196
TOTAL LIABILITIES 25 927 30 514 27 720
TOTAL EQUITY AND LIABILITIES 44 993 50 367 42 017
Net asset book value - per share (cents) 1 980 2 065 1 532
GROUP ANALYSIS
Total assets 44 993 50 367 42 017
Woolworths* 12 680 12 246 11 013
David Jones 24 217 29 658 24 235
Country Road Group 7 044 7 471 5 832
Woolworths Financial Services 1 007 971 885
Treasury 45 21 52
Inventories 6 990 7 117 5 881
Woolworths* 3 550 3 279 2 912
David Jones 2 191 2 345 1 864
Country Road Group 1 249 1 493 1 105
Total liabilities 25 927 30 514 27 720
Woolworths* 5 893 5 672 5 216
David Jones 6 703 7 504 5 791
Country Road Group 1 586 1 857 1 834
Treasury 11 745 15 481 14 879
Approved capital commitments 4 697 3 902 3 636
Woolworths* 2 035 2 066 2 032
David Jones 2 157 1 330 1 017
Country Road Group 505 506 587
* Includes Woolworths Clothing and General Merchandise, Woolworths Food and Woolworths Logistics.
** Certain comparative amounts shown do not correspond to the 2016 Annual Financial Statements and reflect adjustments made. Refer to note 5.
PRELIMINARY AUDITED GROUP RESULTS
GROUP STATEMENT OF CASH FLOWS
52 weeks 52 weeks
to 25 Jun to 26 Jun
2017 2016
Notes Rm Rm
Cash flow from operating activities
Cash inflow from trading 8 177 8 940
Working capital movements (615) (311)
Cash generated by operating activities 7 562 8 629
Investment income received 96 40
Finance costs paid (1 216) (1 168)
Tax paid (1 701) (1 536)
Cash generated by operations 4 741 5 965
Dividends received from joint ventures 223 162
Dividends received from associate - 7
Dividends to ordinary shareholders (3 015) (2 464)
Net cash inflow from operating activities 1 949 3 670
Cash flow from investing activities
Net investment in property, plant and equipment, intangible assets and investment
properties (2 552) (2 829)
Proceeds on disposal of property in Sydney 3 677 -
Acquisition of subsidiary, net of cash acquired 10 (711) -
Other 8 20
Net cash inflow/(outflow) from investing activities 422 (2 809)
Cash flow from financing activities
Settlement of share-based payments through share purchase 4 (39) (34)
Share purchase costs (2) (1)
Finance lease payments (14) (12)
Borrowings raised 1 900 190
Borrowings repaid (3 852) (384)
Acquisition of non-controlling interests in subsidiaries - (85)
Net cash outflow from financing activities (2 007) (326)
Increase in cash and cash equivalents 364 535
Net cash and cash equivalents at the beginning of the year 1 497 891
Effect of foreign exchange rate changes (100) 71
Net cash and cash equivalents at the end of the year 1 761 1 497
GROUP ANALYSIS
Cash generated by operating activities 7 562 8 629
Woolworths 5 050 4 906
David Jones 1 075 2 508
Country Road Group 1 437 1 215
Additions to property, plant and equipment, intangible assets and
investment properties (gross) 3 344 2 825
Woolworths 1 244 1 186
David Jones 996 1 093
Country Road Group 336 546
Country Road Group - Politix acquisition 768 -
PRELIMINARY AUDITED GROUP RESULTS
GROUP STATEMENT OF CHANGES IN EQUITY
Total Total
Share- Non- 52 weeks Share- Non- 52 weeks
holders of controlling to 25 Jun holders of controlling to 26 Jun
the parent interests 2017 the parent interests 2016
Notes Rm Rm Rm Rm Rm Rm
Shareholders' interest at
the beginning of the year 19 826 27 19 853 14 251 46 14 297
Movements for the year:
Profit for the year 5 446 2 5 448 4 344 9 4 353
Other comprehensive income (3 195) - (3 195) 3 644 7 3 651
Total comprehensive income
for the year 2 251 2 2 253 7 988 16 8 004
Shares issued, net of costs 4 138 - 138 2 849 - 2 849
Share-based payments, including
settlements and costs (163) - (163) (2 534) - (2 534)
Dividends to ordinary
shareholders (3 014) (1) (3 015) (2 716) - (2 716)
Acquisition of non-controlling
interests - - - (12) (35) (47)
Shareholders' interest
at the end of the year 19 038 28 19 066 19 826 27 19 853
Dividend per ordinary share (cents) 313.0 313.0
Dividend cover (based on headline earnings) 1.34 1.45
PRELIMINARY AUDITED GROUP RESULTS
SEGMENTAL ANALYSIS
52 weeks 52 weeks
to 25 Jun to 26 Jun
2017 2016 %
Notes Rm Rm change
REVENUE
Turnover 67 411 65 004 3.7
Woolworths Clothing and General Merchandise 13 894 13 701 1.4
Woolworths Food 27 075 24 956 8.5
Woolworths Logistics 597 515 15.9
David Jones 15 030 15 185 (1.0)
Country Road Group 10 815 10 647 1.6
Other revenue and investment income 2 040 1 974 3.3
Woolworths Clothing and General Merchandise 19 27 (29.6)
Woolworths Food 124 115 7.8
David Jones 2 139 2 112 1.3
Country Road Group 52 43 20.9
Treasury 69 28 >100
Intragroup 9 (363) (351) 3.4
Total Group 69 451 66 978 3.7
GROSS PROFIT
Woolworths Clothing and General Merchandise 6 650 6 616 0.5
Woolworths Food 6 794 6 370 6.7
David Jones 6 506 6 902 (5.7)
Country Road Group 6 520 6 313 3.3
Intragroup 9 202 185 9.2
Total Group 26 672 26 386 1.1
PROFIT BEFORE TAX
Woolworths Clothing and General Merchandise 2 168 2 306 (6.0)
Woolworths Food 1 977 1 826 8.3
Woolworths Financial Services 259 248 4.4
David Jones 1 279 1 814 (29.5)
Country Road Group 958 1 016 (5.7)
Treasury (1 096) (1 164) (5.8)
Total Group - adjusted 5 545 6 046 (8.3)
Adjustments 1 181 (13)
Unrealised foreign exchange gains/(losses) 11 (13)
Transaction, relocation, write-down and swap close-out costs (250) -
Profit on sale of property in Sydney 1 762 -
Impairment due to sale of property (342) -
Total Group 6 726 6 033 11.5
Woolworths Clothing and General Merchandise 2 177 2 295 (5.1)
Woolworths Food 1 979 1 824 8.5
Woolworths Financial Services 259 248 4.4
David Jones 2 502 1 814 37.9
Country Road Group 939 1 016 (7.6)
Treasury (1 130) (1 164) (2.9)
NOTES
1. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION
The preliminary Group Annual Financial Statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board (IASB), IAS 34:
Interim Financial Reporting, the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as
issued by the Accounting Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards
Council (FRSC), the requirements of the Companies Act of South Africa and the JSE Limited Listings Requirements.
The preliminary Group Annual Financial Statements have been prepared under the supervision of the Group Finance
Director, Reeza Isaacs CA(SA), and are the full responsibility of the directors.
Accounting policies applied in the preparation of these preliminary Group Annual Financial Statements are consistent with
those applied in the preparation of the Group Annual Financial Statements for the 52-week period ended 25 June 2017,
and are consistent with the prior year, except for the changes in accounting policy disclosed in note 5. The preliminary
Group Annual Financial Statements have been prepared on the historical cost and going concern bases, except where
otherwise indicated. The presentation and functional currency is the South African rand, rounded to the nearest million,
except where otherwise indicated.
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 (refer to note 4).
3. PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND INVESTMENT PROPERTIES
The Group acquired property, plant and equipment at a fair value of R1 962 million (2016: R2 347 million) and acquired
intangible assets at a fair value of R1 382 million (2016: R478 million). This included acquisitions related to business
combinations (refer to note 10).
The Market Street building in Sydney, Australia, with a carrying value of R2 049 million (A$182.0 million), and previously
reclassified as a non-current asset held for sale, was disposed of in the year. This disposal resulted in a profit on sale
of R1 762 million (A$172.6 million).
The investment property, amounting to R78 million, has been transferred to property, plant and equipment due to a
change in use.
4. ISSUE AND PURCHASE OF SHARES
1 820 950 (2016: 2 167 167 ) ordinary shares totalling R138 million (2016: R183 million) were issued and allocated to employees
in terms of the Group's share incentive schemes.
489 382 (2016: 362 215) ordinary shares totalling R39 million (2016: R34 million) were purchased from the market by
Woolworths Proprietary Limited for the purposes of share incentive schemes and are held as treasury shares by the
Group. 277 228 (2016: 685 540) ordinary shares totalling R18 million (2016: R33 million) were allocated to employees in terms
of the Group's Restricted Share Plan.
In the prior year, 24 361 954 ordinary shares totalling R2 414 million were issued and allocated to employees in terms
of the Group's Black Economic Empowerment Employee Share Ownership Scheme, which reached maturity on
30 June 2015, and 2 920 865 ordinary shares totalling R252 million were issued and allocated to shareholders in terms
of the scrip distribution alternative.
5. CHANGE IN ACCOUNTING POLICY
Historically, the Group has assessed deferred tax on indefinite life intangible assets using the assumption that the value
will be recovered through sale, rather than use, as these assets are not amortised.
In November 2016, the IFRS Interpretations Committee (IFRIC) issued a final agenda decision, clarifying that an intangible
asset with an indefinite useful life is subject to consumption and therefore not a non-depreciable asset in terms of
paragraph 51B of IAS 12: Income Taxes. IFRIC, therefore, concluded that the assumption of sale could not be presumed in
calculating the deferred tax liability on an intangible asset.
As a consequence of this decision, the Group has amended its accounting policy to comply with the revised guidance.
The impact of the restatement is to increase goodwill by R2 171 million (A$193 million) as at 26 June 2016, and by
R1 802 million (A$193 million) as at 28 June 2015, with a corresponding credit to deferred tax, split as follows:
2016 2015
Deferred Deferred Deferred Deferred
tax tax tax tax
Goodwill assets liabilities Goodwill assets liabilities
Rm Rm Rm Rm Rm Rm
David Jones 1 971 1 001 970 1 637 1 074 562
Country Road 200 193 7 165 166 -
Total 2 171 1 194 977 1 802 1 240 562
The adoption of other new standards, which became effective in the current year, has resulted in minor changes to accounting
policies and disclosure, none of which have a material impact on the financial position or performance of the Group.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of trade and other receivables, trade and other payables and borrowings approximate their fair values.
In terms of IFRS 13: Fair value measurement, the Group's derivative financial instruments are measured at fair value and
determined to be level two under the fair value hierarchy, using inputs that are observable for the asset or liability, either
directly or indirectly.
7. 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 effect.
8. BORROWING FACILITIES
Unutilised banking and debt facilities amount to R11 833 million (2016: R9 217 million) as follows:
2017 2016
Rm Rm
Committed 11 033 8 417
Uncommitted 800 800
Total 11 833 9 217
In terms of the Memorandum of Incorporation, the Group has unlimited borrowing powers.
9. RELATED-PARTY TRANSACTIONS
The Group entered into related-party transactions, the substance of which is disclosed in the Group's 2017 Annual
Financial Statements. Intragroup adjustments relate to the sale of concession goods between segments and supply chain
distribution adjustments.
10. ACQUISITION OF POLITIX
On 7 November 2016, Woolworths Holdings Limited (WHL), through its subsidiary, Country Road Group Proprietary Limited
(CRG), acquired 100% of the net assets of Politix for a total value of R711 million (A$68.7 million). The acquisition was funded
through internal sources.
The acquisition is consistent with the Group's southern hemisphere strategy of building a strong and diversified portfolio
of iconic brands. Politix will add to the Group's existing Australian stable that already includes David Jones, Country Road,
Witchery, Trenery and Mimco.
Assets acquired and liabilities assumed
WHL has measured the identifiable assets and liabilities of Politix at their acquisition-date fair values. The provisional
values are presented below:
Rm A$m
Non-current assets 255 25
Property, plant and equipment 48 5
Intangible assets 207 20
Current assets 42 4
Inventories 34 3
Trade and other receivables 8 1
Non-current liabilities 69 7
Fair value lease adjustment 7 1
Deferred tax 62 6
Current liabilities 30 3
Trade and other payables 12 1
Provisions 18 2
Total identifiable net assets at fair value 198 19
Goodwill arising on acquisition 513 50
Cash outflow on acquisition 711 69
Goodwill of R513 million (A$49.6 million) and the Politix brand amounting to R207 million (A$20.0 million) have been recognised.
Goodwill is R98 million (A$9.4 million) higher than previously reported, due to remeasurement of assets and liabilities from
acquisition-date fair values, and a change in accounting policy (refer to note 5). The brand was remeasured, and the fair
value is R21 million (A$2.0 million) lower than previously reported. Goodwill represents the value paid in excess of the fair
value of net assets and consists largely of synergies and economies of scale expected from strategic initiatives. Transaction
costs of R19 million (A$1.8 million) have been expensed in the current year and are included in other operating costs.
From the date of acquisition, R366 million (A$36.3 million) of additional revenue and R24 million (A$2.4 million) profit before tax
has accrued. Had the acquisition been effective from the beginning of the year, the directors consider that the contribution to revenue
and profit before tax for the 52 weeks ended 25 June 2017, would have been a further R220 million (A$21.4 million) and R14 million
(A$1.4 million) respectively.
As a result of the acquisition, leases were determined to be either favourable or unfavourable in comparison to market-
related rentals, and accordingly, have been disclosed separately as assets or liabilities on the statement of financial
position. These will unwind over the duration of the leases through the statement of comprehensive income.
The fair values are provisional and are subject to further review for a period of up to one year from acquisition date.
The Australian dollar values have been translated at the closing exchange rate at 7 November 2016 of A$1:R10.3.
11. EVENTS SUBSEQUENT TO THE REPORTING DATE
No event material to the understanding of these preliminary Group Annual Financial Statements has occurred between
the end of the financial year and the date of approval.
12. APPROVAL OF PRELIMINARY GROUP FINANCIAL STATEMENTS
The preliminary Group Annual Financial Statements were approved by the Board of Directors on 23 August 2017.
13. AUDIT OPINION
These preliminary Group Annual Financial Statements have not been audited but have been correctly extracted from the
audited Group Annual Financial Statements, upon which EY have issued an unqualified audit opinion. The auditor's report
does not necessarily report on all the information contained in this announcement. Shareholders are therefore advised that,
in order to obtain a full understanding of the nature of the auditor's engagement, they should obtain a copy of the auditor's
report together with the accompanying financial information from the company's registered office.
DIRECTORATE AND STATUTORY INFORMATION
NON-EXECUTIVE DIRECTORS REGISTERED ADDRESS
Simon Susman (Chairman), Patrick Allaway (Australian), Woolworths House, 93 Longmarket Street,
Peter Bacon (British), Zarina Bassa, Cape Town, 8001
Tom Boardman (Lead Independent Director), PO Box 680, Cape Town, 8000
Hubert Brody, Andrew Higginson (British),
Gail Kelly (Australian), Lord Rose (British), REGISTRATION NUMBER
Nombulelo Moholi 1929/001986/06
EXECUTIVE DIRECTORS TAX NUMBER
Ian Moir (Group Chief Executive Officer) (Australian), 9300/149/71/4
John Dixon (British), Reeza Isaacs, Sam Ngumeni, Zyda Rylands
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