2007/08/23
WHL - Woolworths Holdings Limited - Audited group results for the year ended 30 [JSE Securities Exchange - SENS]
 
WOWOW                                                                           
WHL - Woolworths Holdings Limited - Audited group results for the year ended 30 
june 2007                                                                       
Woolworths Holdings Limited                                                     
Registration number: 1929/001986/06                                             
Share code: WHL  ISIN: ZAE000063863                                             
Audited group results for the year ended 30 June 2007                           
financial highlights                                                            
revenue up 23.1% to R18.6bn                                                     
operating profit up 23.8% to R1.8bn                                             
diluted earnings per share up 27.5% to 131.5 cents                              
diluted HEPS up 21.8% to 125.5 cents                                            
dividend per share up 20.6% to 76.0 cents                                       
trading highlights                                                              
clothing and home turnover up 16.2% to R6.9bn                                   
food turnover up 25.6% to R8.7bn                                                
financial services revenue up 35.4% to R1.3bn                                   
income statement                                                                
                                    Year ended 30 June                          
                                              Restated                          
                                     2007         2006          %               
                        Note           Rm           Rm     change               
Revenue                           18 641.9     15 144.8       23.1              
Turnover                          17 376.9     14 208.0       22.3              
Cost of sales                     11 399.9      9 340.4       22.0              
Gross profit                       5 977.0      4 867.6       22.8              
Other revenue                      1 265.0        936.8       35.0              
Expenses                           5 396.5      4 314.1       25.1              
Depreciation                         316.7        269.9       17.3              
Occupancy cost                       806.0        679.1       18.7              
Employment cost                    2 129.3      1 701.4       25.1              
Other operating cost               2 144.5      1 663.7       28.9              
Operating profit                   1 845.5      1 490.3       23.8              
Finance costs                        378.7        243.9       55.3              
Profit before exceptional item     1 466.8      1 246.4       17.7              
Exceptional item            3         54.6            -     >100.0              
Profit before tax                  1 521.4      1 246.4       22.1              
Tax                         4        434.7        409.0        6.3              
Profit after tax                   1 086.7        837.4       29.8              
Attributable to:                                                                
Ordinary shareholders              1 074.4        835.6       28.6              
Minority shareholders                 12.3          1.8     >100.0              
Reconciliation of headline earnings                                             
Attributable earnings              1 074.4        835.6       28.6              
Profit on disposal of property,                                                 
plant and equipment net of minority                                             
shareholders' interest              (48.0)        (0.6)                         
Foreign exchange profit realised                                                
on repayment of loan by subsidiary   (1.1)            -                         
Headline earnings                  1 025.3        835.0       22.8              
Headline earnings per share (cents)  127.8        105.0       21.7              
Earnings per share (cents)           133.9        105.1       27.4              
Diluted headline earnings per                                                   
share (cents)                        125.5        103.0       21.8              
Diluted earnings per share (cents)   131.5        103.1       27.5              
Distribution per share (cents)        76.0         63.0       20.6              
Distribution cover (based on                                                    
headline earnings per share)           1.7          1.7                         
Number of shares in issue (millions) 809.3        797.2        1.5              
Weighted average number of shares                                               
in issue (millions)                  802.4        795.3        0.9              
GROUP ANALYSIS                                                                  
Revenue                                                                         
Turnover                          17 376.9     14 208.0       22.3              
Woolworths                        16 022.9     13 227.3       21.1              
- Clothing and home                6 985.0      6 012.2       16.2              
- Food                             8 718.0      6 941.5       25.6              
- Logistics services and other       319.9        273.6       16.9              
Country Road                       1 354.0        980.7       38.1              
Interest                           1 022.4        765.4       33.6              
Other revenue                        242.6        171.4       41.5              
                                 18 641.9     15 144.8       23.1               
Operating profit                                                                
Woolworths                         1 788.8      1 471.3       21.6              
Country Road                          56.7         19.0     >100.0              
                                  1 845.5      1 490.3       23.8               
Statement of changes in equity                                                  
                                       Year ended 30 June                       
                                  Shareholders'          Minority               
                                interest before     shareholders'               
                                     minorities          interest               
                                             Rm                Rm               
Shareholders' interest at the beginning of                                      
the year                                 2 606.3              27.9              
Movements for the period:                                                       
Issue of shares                            111.8                 -              
Share repurchase                          (26.3)                 -              
Recognised gains and losses                555.1              14.6              
Distributable reserves                     515.6              10.5              
Profit for the year                      1 074.4              12.3              
Distributions to shareholders            (550.4)                 -              
Net fair value adjustments on financial                                         
instruments                               (29.2)             (1.8)              
Share-based payments                        27.0                 -              
Acquisition of former investment               -                 -              
BEE transaction costs                      (6.2)                 -              
Non-distributable reserves                                                      
Exchange differences on translation of                                          
foreign subsidiaries                        39.5               4.1              
Shareholders' interest at the end of                                            
the year                                 3 246.9              42.5              
                                               Year ended 30 June               
                                                Total       Total               
                                                 2007        2006               
                                                   Rm          Rm               
Shareholders' interest at the beginning of                                      
the year                                       2 634.2     2 210.9              
Movements for the period:                                                       
Issue of shares                                  111.8        72.7              
Share repurchase                                (26.3)      (61.7)              
Recognised gains and losses                      569.7       412.3              
Distributable reserves                           526.1       412.6              
Profit for the year                            1 086.7       837.4              
Distributions to shareholders                  (550.4)     (474.2)              
Net fair value adjustments on financial                                         
instruments                                     (31.0)        32.2              
Share-based payments                              27.0        18.0              
Acquisition of former investment                     -       (0.8)              
BEE transaction costs                            (6.2)           -              
Non-distributable reserves                                                      
Exchange differences on translation of                                          
foreign subsidiaries                              43.6       (0.3)              
Shareholders' interest at the end of                                            
the year                                       3 289.4     2 634.2              
Cash flow statement                                                             
                                               Year ended 30 June               
                                                         Restated               
                                                2007         2006               
                                                  Rm           Rm               
Cash flow from operating activities                                             
Cash inflow from trading                      1 373.7      1 072.5              
Working capital movements                       183.6        185.4              
Cash applied to financial services assets   (1 182.4)      (882.2)              
Cash generated by operating activities          374.9        375.7              
Interest received                             1 018.3        760.3              
Finance costs paid                            (366.6)      (244.6)              
Tax paid                                      (565.0)      (483.4)              
Cash generated by operations                    461.6        408.0              
Distributions to shareholders                 (550.4)      (474.2)              
Net cash outflow from operating activities     (88.8)       (66.2)              
Cash outflow from investing activities        (527.2)      (598.5)              
Cash flow from financing activities                                             
Shares issued                                   111.8         72.7              
Repurchase of shares                           (26.3)       (61.7)              
Notes issued                                  1 015.0            -              
Notes redeemed                                (300.0)            -              
BEE transaction costs                           (6.2)            -              
Net cash inflow from financing activities       794.3         11.0              
Increase/(decrease) in cash and                                                 
cash equivalents                                178.3      (653.7)              
Cash and cash equivalents at the beginning of the                               
year                                          (623.4)         23.3              
Effect of foreign exchange rate changes          22.5          7.0              
Cash and cash equivalents at the end                                            
of the year                                   (422.6)      (623.4)              
GROUP ANALYSIS                                                                  
Cash inflow from trading                      1 373.7      1 072.5              
Woolworths                                    1 275.5      1 019.0              
Country Road                                     98.2         53.5              
Gross capital expenditure                       649.1        637.9              
Woolworths                                      591.1        599.8              
Country Road                                     58.0         38.1              
Balance sheet                                                                   
                                                    As at 30 June               
                                                         Restated               
                                                  2007       2006               
                                                    Rm         Rm               
ASSETS                                                                          
Non-current assets                              2 951.3    2 490.6              
Property, plant and equipment             5     1 867.1    1 597.7              
Investment property                               105.9      109.0              
Loans to customers                                289.8      249.2              
Prepaid employment costs                           61.4       39.5              
Participation in export partnerships               70.4       71.6              
Other loans and prepayments                       190.4      144.7              
Goodwill                                           23.0       23.0              
Deferred tax                                      343.3      255.9              
Current assets                                  7 491.2    6 277.7              
Inventories                                     1 202.6      841.4              
Woolworths card debtors                         3 560.2    2 971.2              
Credit card receivables                           904.8      593.7              
Accounts receivable                               605.0      815.8              
Loans to customers                                781.2      640.9              
Tax                                                13.1        4.5              
Cash                                              424.3      410.2              
Total assets                                   10 442.5    8 768.3              
EQUITY AND LIABILITIES                                                          
Capital and reserves                            3 289.4    2 634.2              
Ordinary shareholders' interest                 3 246.9    2 606.3              
Minority shareholders' interest                    42.5       27.9              
Non-current liabilities                         2 906.6    2 801.0              
Interest-bearing borrowings                     2 179.0    2 100.0              
Operating lease accrual                           426.7      420.2              
Post-retirement medical aid liability             227.2      202.7              
Deferred tax                                       73.7       78.1              
Current liabilities                             4 246.5    3 333.1              
Accounts payable                                2 092.4    1 612.1              
Provisions                                        156.3      131.0              
Tax                                               214.9      256.4              
Interest-bearing borrowings                     1 782.9    1 333.6              
Total equity and liabilities                   10 442.5    8 768.3              
Net asset book value - per share (cents)          401.2      326.9              
GROUP ANALYSIS                                                                  
Total assets                                   10 442.5    8 768.3              
Woolworths                                      9 881.1    8 368.1              
Country Road                                      561.4      400.2              
Inventories                                     1 202.6      841.4              
Woolworths                                      1 023.1      707.9              
Country Road                                      179.5      133.5              
Approved commitments for capital expenditure      547.0      419.5              
Woolworths                                        396.0      366.2              
Country Road                                      151.0       53.3              
segmental analysis                                                              
                                    Year ended 30 June                          
                                              Restated                          
                                     2007         2006          %               
                                       Rm           Rm     change               
Revenue                                                                         
Retail                                                                          
Woolworths                        16 099.5     13 288.7       21.2              
Country Road                       1 361.8        993.6       37.1              
Financial services                 1 274.4        941.4       35.4              
Intragroup                          (93.8)       (78.9)                         
Total group                       18 641.9     15 144.8       23.1              
Profit before tax and exceptional item                                          
Retail                                                                          
Woolworths                         1 252.8      1 069.1       17.2              
Country Road                          54.9         14.9     >100.0              
Financial services                   159.1        162.4      (2.0)              
Total group                        1 466.8      1 246.4       17.7              
Return on equity                                                                
Retail                                   %            %                         
Woolworths                            65.4         58.6                         
Country Road                          34.6          6.2                         
Financial services                    11.9         14.7                         
Total group                           35.1         34.8                         
Notes                                                                           
1 Basis of preparation                                                          
The financial statements are prepared in accordance with, and comply with       
International Financial Reporting Standards (IFRS) and the South African        
Companies Act of 1973. They are prepared on going concern and historical cost   
bases as modified by the revaluation of certain financial instruments required  
to be recorded at fair value.                                                   
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  
30 June 2006, except for the adoption of the following IFRS, IFRIC              
interpretations and amendments that became effective during the current period  
and had no impact on the reported results:                                      
- IFRIC 4 Determining whether an Arrangement Contains a Lease;                  
- IFRIC 8 Scope of IFRS 2;                                                      
- IFRIC 9 Reassessment of Embedded Derivatives;                                 
- AC 502 Substantially enacted Tax Rates and Tax Laws;                          
- AC 503 Accounting for Black Economic Empowerment (BEE) Transactions;          
- IAS 19 Amendment - Employee Benefits and Actuarial Gains and Losses,          
Group Plans and Disclosures;                                                    
- IAS 39 Amendment - The Fair Value Option; and                                 
- IAS 39 Amendment - Financial Guarantee Contracts.                             
3 Exceptional item                                                              
During the year, the group disposed of property with a net book value of R27.9m.
The full pre-tax profit on disposal of R54.6m is treated as an exceptional item 
as the transaction is non-recurring in nature and falls outside the scope of the
group's operational activities.                                                 
4 Tax                                                                           
The effective tax rate of 28.6% (2006: 32.8%) is lower than the standard rate of
normal tax primarily as a result of the recognition of a deferred tax asset     
relating to asset timing differences in a subsidiary company.                   
5 Property, plant and equipment                                                 
During the year, the group acquired assets with a cost of R652.1m (2006:        
R607.4m).                                                                       
Assets with a net book value of R90.1m (2006: R49.5m) were disposed of by the   
group during the same period, resulting in a profit before tax of R56.1m        
(2006:R0.2m), including the disposal of property referred to in note 3.         
6 Issue of shares                                                               
During the year, 13 368 429 (2006: 14 539 120) ordinary shares were issued in   
terms of the group's share incentive scheme. 1 268 051 (2006: 4 523 045) shares 
were repurchased during the year.                                               
7 Contingent liabilities                                                        
The holding company provides sureties for the banking facilities and lease      
obligations of certain subsidiaries. In the opinion of the directors, the       
possibility of loss arising therefrom is remote.                                
8 Borrowing facilities                                                          
Unutilised banking facilities amount to R2 530.0m (2006: R1 716.0m). In terms of
the articles of association, there is no limit on the group's authority to raise
interest-bearing debt.                                                          
9 Comparative figures                                                           
Comparative figures have been restated to recognise the notional interest earned
on loans to employees granted in terms of the group's share purchase scheme and 
the corresponding amortisation of prepaid employment costs. There is no impact  
on reported profits.                                                            
An amount of R8m has been reallocated from tax payable to trade and other       
payables as at 30 June 2006.                                                    
10 Audit opinion                                                                
These abridged financial statements have been extracted from the audited        
financial statements on 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.                                                              
Commentary                                                                      
Group results                                                                   
The 23.1% increase in group revenue to R18.6bn reflected the improved growth in 
retail sales and increased interest earned from financial services products.    
The gross margin was maintained at 34.4%. This included one-off costs of R45m   
arising from the final phase of the implementation of the new stock system.     
Operating profit grew by 23.8% to R1.8bn, despite being unable to pass on the   
higher interest rates to our credit customers as a result of a fixed usury rate 
until the last three months of the financial year.                              
Expenses increased by 25.1% through higher bad debts and associated provisions  
arising from a tougher credit environment. Country Road expenses showed a       
significant uplift due to the fluctuations in currency and the change to the    
concession model.                                                               
The operating margin improved to 9.9% (2006: 9.8%).                             
Interest paid increased by 55.3% due to higher borrowings through the growth in 
our books and the increasing interest rates. A reduction in the effective tax   
rate resulted mainly from recognising a deferred tax asset due to asset timing  
differences in Country Road.                                                    
Diluted headline earnings per share increased by 21.8% from 103.0 cents per     
share to 125.5 cents per share. The pre-tax profit of R54.6m from the disposal  
of land in Midrand contributed to the higher increase in diluted earnings per   
share of 27.5%. Return on equity increased to 35.1% (2006: 34.8%).              
A total dividend of 76.0 cents per share is declared for the year, representing 
a 20.6% increase from the prior year.                                           
operating review                                                                
Woolworths                                                                      
Trading environment                                                             
Consumer spending was high but did slow towards the end of the period.          
Retail                                                                          
Clothing and general merchandise improved performance with sales growing by     
16.2% in total and 12.8% in comparable stores. Inflation averaged 2.8% over the 
period. Good availability in core ranges, entrenched taste levels in menswear   
and an improved value range in childrenswear contributed to the improved        
performance.                                                                    
Food continued to perform well. Sales grew by 25.6% in total and 15.1% in       
comparable stores. Inflation averaged approximately 8.3% over the period.       
Growth in this division continues to be driven by quality and innovation and    
store roll-out, enabling customers to use us more conveniently as their main    
shop.                                                                           
Trading space                                                                   
Trading space was expanded in clothing and general merchandise by 3.6% and 12.1%
in food as at 30 June 2007.                                                     
Financial services                                                              
Revenue increased by 35.4% as a result of high growth in our books of 25.3% and 
the increase in interest rates over the period.                                 
The interest yield grew to 19.9% (2006: 19.0%).                                 
The tougher collections environment resulted in net bad debt and related        
provision charges increasing to 6.9% (2006: 5.5%) of the gross book.            
Country Road                                                                    
Sales increased by 15.8% in Australian dollar terms with a strong performance in
the second half. The fashionability of ranges and the continued drive to provide
better value were well received by customers.                                   
Prospects                                                                       
Higher interest rates, a slow down in credit and increasing food prices are     
expected to slow consumer spending. The brand though is well positioned for the 
evolving market and we expect to show acceptable real growth in the year ahead. 
Empowerment                                                                     
On 12 June 2007 shareholders approved a BEE transaction whereby 10% of the      
company's ordinary issued share capital was set aside for eligible              
Woolworths employees. There are approximately 17 000 participants, 90% of whom  
are black. The scheme had no impact on the reported results as the shares were  
issued after the financial year end.                                            
Our people are the real drivers of the Woolworths brand. We welcome them as part
owners of our business. We know this will encourage them to keep on making the  
`Woolies difference'.                                                           
Changes to the board of directors                                               
On 1 July 2007 Judy Dlamini was appointed to the board as a non-executive       
director.                                                                       
DA Hawton      SN Susman                                                        
Chairman       Chief executive officer   Cape Town, 23 August 2007              
Dividend payment                                                                
Notice is hereby given that the directors have declared a final dividend of 46.5
cents per share for the six months ended 30 June 2007.                          
The salient dates for the dividend will be as follows:                          
Last day to trade to receive dividend     Friday, 7 September 2007              
Shares commence trading "ex" dividend    Monday, 10 September 2007              
Record date                              Friday, 14 September 2007              
Payment date                             Monday, 17 September 2007              
Share certificates may not be dematerialised or rematerialised between Monday,  
10 September 2007 and Friday, 14 September 2007, 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 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.                                                               
CL Lowe                                                                         
Group secretary                         Cape Town, 23 August 2007               
directorate and statutory information                                           
Non-executive directors: Buddy Hawton (Chairman), Peter Bacon (British), Mair   
Barnes (British), Nigel Colne (British), Judy Dlamini, Brian Frost, Mike        
Leeming, Chris Nissen, Sindi Zilwa                                              
Executive directors: Simon Susman (CEO), Richard Inskip, Andrew Jennings        
(British), Zyda Rylands, Norman Thomson                                         
Group secretary: Cherrie Lowe Share code: WHL ISIN: ZAE000063863                
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 Inc and SAB & T Inc 
Bankers: The Standard Bank of South Africa Limited Sponsor: Rand Merchant Bank  
(A division of FirstRand Bank Limited)                                          
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70    
Marshall Street, Johannesburg 2001                                              
visit our investor relations site:                                              
www.woolworthsholdings.co.za                                                    
Date: 23/08/2007 08:00:03 Produced by the JSE SENS Department.                  
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information disseminated through SENS.                                          
Source: JSE Securities Exchange - SENS
 
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