2004/08/19
Woolworths Holdings Limited - Audited Group Results for the year ended 30 June [JSE Securities Exchange - SENS]
 
2004
WOOLWORTHS HOLDINGS LIMITED
(Registration number : 1929/001986/06)
ISIN Code:     ZAE000028288
JSE Code :     WHL
Audited group results for the year ended 30 June 2004
another year of continued growth
*    Revenue up 11.8%
*    Operating profit up 19.6% - over R1bn
*    HEPS up 21.3%
*    Distribution per share up 32.8%
*    Foods market share at all time high
*    3-year compound annual growth
*    HEPS up 34.5%
*    Distribution per share up 36.9%
*    ROE 12.9% in 2001 to 25.7%
INCOME STATEMENT
                                              Year ended
                                               30 June
                                            2004       2003       %
                                     Note   Rm         Rm         Change
Revenue                                     11 281.7   10 094.8   11.8
Turnover                                    10 648.8   9 500.3    12.1
Cost of merchandise                         7 262.2    6 358.6    14.2
Gross profit                                3 386.6    3 141.7    7.8
Other revenue                               632.9      594.5      6.5
Expenses                                    2 957.7    2 848.2    3.8
Depreciation                                232.8      227.1      2.5
Occupancy cost                              544.4      512.4      6.2
Employment cost                             1 303.2    1 276.5    2.1
Other operating cost                        877.3      832.2      5.4
Operating profit                            1 061.8    888.0      19.6
Interest paid                               108.7      87.4       24.4
Net profit before exceptional
items                                       953.1      800.6      19.0
Exceptional items                     2     (16.4)     (22.2)
Net profit before tax                       936.7      778.4      20.3
Tax                                   3     268.9      227.4      18.2
Net profit after tax                        667.8      551.0      21.2
Outside shareholders' interest              (1.0)      (1.4)
Net profit attributable to
ordinary shareholders                       666.8      549.6      21.3
Reconciliation of headline earnings
Attributable earnings - all
operations                                  666.8      549.6      21.3
Goodwill amortisation                       10.1       10.0
Loss on disposal of property,
plant and equipment net of outside
shareholders' interest                      0.1        4.9
Reversal of provision for loss
on discontinuance
net of outside shareholders' interest       -          (1.3)
Headline earnings                           677.0      563.2      20.2
Headline earnings per share (cents)         78.6       64.8       21.3
Earnings per share (cents)                  77.4       63.3       22.3
Diluted earnings per share (cents)    4     75.3       61.9       21.6
Distributions per share (cents)       5     38.5       29.0       32.8
Distribution cover                          2.0        2.2
Number of shares in issue (millions)        868.3      853.1      1.8
Weighted average number of shares
in issue (millions)                         861.2      868.5      (0.8)
GROUP ANALYSIS
Revenue
Turnover                                    10 648.8   9 500.3    12.1
Woolworths                                  9 715.4    8 430.0    15.2
- Clothing and home                         4 792.2    4 280.4    12.0
- Foods                                     4 747.1    3 980.8    19.2
- Logistics services and other              176.1      168.8      4.3
Country Road                                933.4      1 070.3    (12.8)
Interest                                    543.4      522.3      4.0
Other revenue                               89.5       72.2       24.0
                                            11 281.7   10 094.8   11.8
Operating profit
Woolworths                                  1 048.4    870.7      20.4
Country Road                                13.4       17.3       (22.5)
                                            1 061.8    888.0      19.6
CASH FLOW STATEMENT
                                                         Year ended
                                                          30 June
                                                       2004       2003
                                                       Rm         Rm
Cash flow from operating activities
Cash inflow from trading                               794.4      681.0
Working capital movements                              (7.5)      104.4
Cash applied to financial services assets              (709.8)    (461.6)
Cash generated by operating activities                 77.1       323.8
Interest received                                      540.9      519.5
Interest paid                                          (105.8)    (87.4)
Tax paid                                               (331.5)    (191.7)
Cash generated by operations                           180.7      564.2
Distributions to shareholders                          (271.7)    (201.3)
Net cash (outflow)/inflow from
operating activities                                   (91.0)     362.9
Cash outflow from investing activities                 (393.2)    (322.2)
Cash flow from financing activities
Shares issued                                          54.5       39.5
Shares repurchased by subsidiary                       -          (235.1)
Net cash inflow/(outflow) from
financing activities                                   54.5       (195.6)
Decrease in cash and cash equivalents                  (429.7)    (154.9)
Cash acquired on acquisition of
subsidiary                                             -          10.2
Cash and cash equivalents at the
beginning of the year                                  (514.7)    (362.0)
Effect of foreign exchange rate changes                (5.5)      (8.0)
Cash and cash equivalents at the end
of the year                                            (949.9)    (514.7)
GROUP ANALYSIS
Cash generated by operations
- before tax                                           512.2      755.9
Woolworths                                             472.8      696.8
Country Road                                           39.4       59.1
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS' INTEREST
                                                         Year ended
                                                          30 June
                                                       2004       2003
                                                       Rm         Rm
Ordinary shareholders' interest at
the beginning of the year                              2 412.4    2 337.3
As previously reported                                            2 336.1
Adjustment to opening balance arising
from the change in accounting policy
for the consolidation
of the share trust                                                1.2
Movements for the year:
Share premium arising from shares
issued under share
purchase scheme                                        54.5       39.5
Shares repurchased by subsidiary                       -          (235.1)
Recognised gains and losses                            383.9      270.7
Distributable reserves                                 406.2      306.1
Net profit attributable to ordinary
shareholders                                           666.8      549.6
Distributions to shareholders                          (271.7)    (201.3)
Net fair value adjustment on financial
instruments                                            11.1       (42.2)
Non-distributable reserves
Exchange differences on translation of
foreign entities                                       (22.3)     (35.4)
Ordinary shareholders' interest at the
end of the year                                        2 850.8     2 412.4
BALANCE SHEET
                                                             At
                                                         30 June
                                                       2004       2003
                                                       Rm         Rm
ASSETS
Non-current assets                                     1 757.7    1 560.2
Property, plant and equipment                          1 192.4    1 037.6
Investments                                            18.6       12.4
Loans to customers                                     162.5      182.3
Participation in export partnerships                   171.6      183.2
Goodwill                                               -          10.1
Other loans                                            143.9      117.7
Deferred tax                                           68.7       16.9
Current assets                                         3 992.3    3 235.3
Inventories                                            576.4      564.4
Woolworths card debtors                                2 148.2    1 669.3
Credit card receivables                                178.7      105.9
Accounts receivable                                    459.4      382.2
Loans to customers                                     415.6      273.1
Tax                                                    26.0       24.4
Cash                                                   188.0      216.0
Total assets                                           5 750.0    4 795.5
EQUITY AND LIABILITIES
Capital and reserves                                   2 873.2    2 434.6
Ordinary shareholders' interest                        2 850.8    2 412.4
Outside shareholders' interest                         22.4       22.2
Non-current liabilities                                337.8      285.1
Post-retirement medical-aid liability                  151.2      130.8
Deferred tax                                           186.6      154.3
Current liabilities                                    2 539.0    2 075.8
Accounts payable                                       1 132.9    1 039.3
Provisions                                             113.6      111.5
Tax                                                    154.6      194.3
Interest bearing borrowings                            1 137.9    730.7
Total equity and liabilities                           5 750.0    4 795.5
Net asset book value - per share (cents)               328.3      282.8
GROUP ANALYSIS
Total assets                                           5 750.0    4 795.5
Woolworths                                             5 429.4    4 431.6
Country Road                                           320.6      363.9
Inventories                                            576.4      564.4
Woolworths                                             472.6      433.3
Country Road                                           103.8      131.1
Approved commitments for capital expenditure
for the next financial year                            298.5      189.2
Woolworths                                             259.1      152.6
Country Road                                           39.4       36.6
SEGMENTAL ANALYSIS
Operating results             Revenue              Net profit before tax
                     2004       2003       %       2004    2003   %
                     Rm         Rm         change  Rm      Rm     change
Retail
   Woolworths        9 751.2    8 466.6     15.2   715.6   550.1   30.1
   Country Road      948.6      1 081.9     (12.3) 8.8     13.1    (32.8)
Financial services   647.3      601.7       7.6    212.3   215.2   (1.3)
Intragroup           (65.4)     (55.4)
Total group          11 281.7   10 094.8    11.8   936.7   778.4   20.3
Balance sheets         Capital and reserves        Return on Equity
                     2004       2003       %       2004    2003
                     Rm         Rm         change  %       %
Retail
   Woolworths        911.8      788.5      15.6    61.1    47.0
   Country Road      186.8      185.4      0.8     4.8     5.4
Financial services   1 774.6    1 460.7    21.5    9.3     11.1
Total group          2 873.2    2 434.6    18.0    25.7    23.7
NOTES
1. The financial statements comply with South African Statements of Generally
Accepted Accounting Practice. Accounting policies used are consistent with those
applicable for the June 2003 financial statements, except as follows:
Following the recommendation issued by the JSE Securities Exchange, the
Woolworths Holdings Share Trust was consolidated. As a result, a cumulative
adjustment to increase the opening retained profit in the prior year of R1.2m
was required. There was no effect on the income statement.
The format of the cash flow statement has been revised to include cash applied
to financial services assets as a separate line item under operating activities.
The cash flow from the Woolworths card debtors was previously included in
working capital movements. Cash flows from loans to customers and credit card
receivables have been reclassified from investing to operating activities.
2. Exceptional items
                                                       2004       2003
Goodwill amortisation                                  10.1       10.0
Provision for onerous lease commitments                6.3        13.7
Reversal of provision for loss on discontinuance       -          (1.5)
                                                       16.4       22.2
There is no tax effect arising from the exceptional items, other than in respect
of the onerous lease provision, of R1.9m (2003: R4.1m).
3. The effective tax rate of 28.7% (2003: 29.2%) is mainly due to the
utilisation of tax losses in subsidiaries.
4. The difference between earnings per share and diluted earnings per share
results from outstanding options.
5. Distributions comprise the interim distribution of 13.0c per share, paid on 8
March 2004 and the final distribution from share premium of 25.5c per share
declared on 18 August 2004.
6. Gross capital expenditure on property, plant and equipment
                                                       2004       2003
Woolworths                                             392.5      377.9
Country Road                                           33.9       36.2
                                                       426.4      414.1
7. Unutilised banking facilities amount to R1 098.7m (2003: R1 266.8m). In terms
of the Articles of Association, there is no limit on the group's authority to
raise interest bearing debt.
8. The group's annual financial statements have been audited by the group's
joint auditors Ernst & Young and SAB & T Inc and a copy of their unqualified
report is available for inspection at the company's registered office.
COMMENTARY
Group results
The board is pleased to report another year of growth with a 21.3% increase in
headline earnings per share for the financial year to June 2004, increasing from
64.8 cents per share to 78.6 cents per share. Group ROE has improved from 23.7%
to 25.7%. In lieu of a dividend, a distribution from share premium of 25.5 cents
per share is declared, taking total distributions for the year to 38.5 cents per
share, up 32.8% from last year.
Trading environment
The South African retail environment was characterised by buoyant consumer
demand. South Africans are feeling good about their country. Interest rates and
personal debt levels are at their lowest for many years. Ten years into our
democracy the growing number of economically active consumers has broadened,
assisted by employment equity and empowerment and are benefiting all sectors of
the retail industry.
The strong rand created difficult trading conditions for international franchise
operations.
In Australia, consumer spending continued to grow supported by improved tax
benefits, which offset a levelling in house prices.
Financial review
Group turnover increased by 12.1% to R10.6bn.
In the Woolworths operating group, Clothing and Home grew turnover by 12.0%.
Imported merchandise, cheaper through the strengthening of the rand, made us
less competitive. The Foods business grew by 19.2% which was well ahead of the
market.
Country Road's sales declined by 6.5% in Australian dollar terms, in part
affected by reduced wholesale sales following the decision to focus on a single
wholesale customer. In addition, sales in rand terms were negatively impacted by
the strengthening of the rand against the
Australian dollar.
The group's gross profit percentage declined from 33.1% to 31.8% due to the
larger contribution from the Foods business and local franchise operations both
of which enhanced total operating profit.
Operating profit for the group increased by 19.6% to R1 062m as the business
benefited from improved efficiencies and stringent cost control.
Operational review
Woolworths
Retail
Net profit before tax in the Woolworths operating group retail segment grew
30.1% to R715.6m.
Clothing and Home recorded sales growth of 12.0% (9.0% in comparable stores).
The second half of the year saw an encouraging volume growth, attributable to
improved customer confidence and better values.
Womenswear had an excellent year, gaining market share as the market responded
well to our improved offer. Menswear and Childrenswear had a disappointing year
and are currently being repositioned to follow the lessons learnt in womenswear.
Sales volumes in Home improved substantially in the second half as we introduced
new ranges at more competitive prices and an improved store environment.
Foods performed exceptionally well with sales growing by 19.2% (7.8% in
comparable stores). Despite the drop in food inflation in the second half of the
year, sales in this period exceeded the 17.7% growth achieved in the first half
of the year.
A further gain in market share from 7.0% to 7.4% confirms "the good food
strategy" of consistently offering customers exceptional quality and
convenience, resulting in more customers doing their main shop at Woolworths.
Trading space continued to increase with the opening of more convenience stores.
Financial services
Substantial growth of 30.2% in our in-store card, credit card, and personal loan
books was countered by an 8.0% reduction in the usury rate over the period,
resulting in a decline in net profit before tax from R215.2m to R212.3m.
Customers are increasing their use of their Woolworths cards whilst bad debt
continues to be well managed, representing 1.7% of advances
(2003: 2.0%).
COUNTRY ROAD
Country Road achieved a small profit before tax of A$2.5m. The repositioning of
Country Road which commenced in July with a new brand presentation and better,
more customer-focused ranges should start to show benefits.
Prospects
The retail environment continues to experience solid growth on the back of lower
interest rates and inflation. Consumer spending is expected to remain strong
well into the year.
In Woolworths the repositioning in Menswear and Childrenswear, growth in
Ladieswear, Home and Foods and a drive to grow the Woolworths card book should
result in further real sales growth in the next year. In addition focus on
supply chain efficiencies and expense control will continue. The diversity of
our portfolio is beginning to deliver a less cyclical element to our earnings.
As announced in our trading update on 13 July 2004, the group has embarked on a
process to evaluate alternatives in order to optimise its financial services
balance sheet structure. In the event of such a restructure the board will
consider how it wishes to dispose of surplus funds which may result from this
process.
The board expects to continue to deliver real growth to our shareholders in the
year ahead.
DA Hawton
Chairman
SN Susman
Chief executive officer
Cape Town, 19 August 2004
Cash distribution
Notice is hereby given that the directors have declared a cash distribution of
25.5 cents per share, in lieu of an ordinary final dividend, for the year ended
30 June 2004. The payment will be made by way of a reduction in the share
premium account and in terms of the general authority to make payments to
shareholders, granted at the annual general meeting held in November 2003.
Shareholders are advised that the last day to trade in order to participate in
the cash distribution will be on Friday, 3 September 2004. The shares will trade
"ex" the distribution from commencement of business on Monday, 6 September 2004
and the record date will be Friday, 10 September 2004. The distribution will be
payable on Monday, 13 September 2004.
Share certificates may not be dematerialised or rematerialised between Monday, 6
September 2004 and Friday, 10 September 2004, both days inclusive.
CL Lowe
Group company secretary
Cape Town, 19 August 2004
DIRECTORATE AND STATUTORY INFORMATION
Non-executive directors: Buddy Hawton (Chairman), Mair Barnes (British), Nigel
Colne (British), Nolitha Fakude, Brian Frost, Mike Leeming, Chris Nissen, Sindi
Zilwa
Executive directors: Simon Susman (CEO), Richard Inskip, Norman Thomson
Group company secretary: Cherrie Lowe
Registered address (postal and physical): PO Box 680, Cape Town 8000
Woolworths House, 93 Longmarket Street, Cape Town 8001.
Registration number: 1929/001986/06
Auditors: Ernst & Young and SAB & T Inc
Bankers: Standard Bank of South Africa Limited
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001
visit our investor relations site: www.woolworthsholdings.co.za
Date: 19/08/2004 08:00:09 AM Produced by the JSE SENS Department
Source: JSE Securities Exchange - SENS
 
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