2008/08/21
WHL - Woolworths Holdings - Audited Group Results For The Year Ended 30 June [JSE Securities Exchange - SENS]
 
WOWOW                                                                           
WHL - Woolworths Holdings - Audited Group Results For The Year Ended 30 June    
                             2008 and dividend declaration                      
WOOLWORTHS HOLDINGS LIMITED                                                     
Registration number: 1929/001986/06                                             
Share code: WHL & ISIN: ZAE000063863                                            
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2008                           
financial highlights                                                            
- turnover up 15.5%                                                             
- profit before tax, exceptional items and BEE charge up 6.2%                   
- adjusted HEPS up 4.3%                                                         
- total dividend per share increased to 79 cents                                
consolidated income statement                                                   
Year ended 30 June                             2008         2007          %     
                                 Note           Rm           Rm     change      
Revenue                                    21 753.6     18 641.9       16.7     
Turnover                                   20 064.9     17 376.9       15.5     
Cost of sales                              13 076.7     11 399.9       14.7     
Gross profit                                6 988.2      5 977.0       16.9     
Other revenue                               1 688.7      1 265.0       33.5     
Expenses                                    6 670.3      5 396.5       23.6     
Depreciation and amortisation                 374.4        316.7                
Occupancy cost                              1 073.6        806.0                
Employment cost                             2 560.6      2 129.3                
Net bad debts and bad debt                                                      
provisions                                    584.3        351.5                
Other operating cost                        2 077.4      1 793.0                
Operating profit                            2 006.6      1 845.5        8.7     
Finance costs                                 502.5        378.7       32.7     
Profit before exceptional item              1 504.1      1 466.8        2.5     
Exceptional item                                  -         54.6                
Profit before tax                           1 504.1      1 521.4      (1.1)     
Tax                                  4        552.5        434.7       27.1     
Profit after tax                              951.6      1 086.7     (12.4)     
Attributable to:                                                                
Shareholders of the parent                    943.1      1 074.4     (12.2)     
Minority shareholders                           8.5         12.3     (30.9)     
Reconciliation of headline                                                      
earnings                                                                        
Earnings attributable to                                                        
shareholders of the parent                    943.1      1 074.4     (12.2)     
BEE preference dividend paid                  (6.7)            -                
Basic earnings                                936.4      1 074.4                
Loss/(profit) on disposal of                                                    
property, plant and equipment                   0.8       (56.1)                
Foreign exchange profit realised                                                
on repayment of loan by subsidiary                -        (1.1)                
Total tax impact of adjustments               (0.2)          8.1                
Headline earnings                             937.0      1 025.3      (8.6)     
BEE expense                                    53.8            -                
STC on share buy-back                          20.0            -                
Recognition of Country Road                                                     
deferred tax asset                                -       (64.6)                
Adjusted headline earnings                  1 010.8        960.7        5.2     
Headline earnings per share                                                     
(cents)                                       115.7        127.8      (9.5)     
Earnings per share (cents)                    115.6        133.9     (13.7)     
Adjusted headline earnings per                                                  
share (cents)                                 124.8        119.7        4.3     
Diluted headline earnings per                                                   
share (cents)                        5        112.9        125.5     (10.0)     
Diluted earnings per share (cents)   5        112.8        131.5     (14.2)     
Adjusted diluted headline                                                       
earnings per share (cents)           5        120.8        117.6        2.7     
Dividend per ordinary share                                                     
(cents)                                        79.0         76.0        3.9     
Dividend cover (based on adjusted                                               
headline earnings per share)                    1.6          1.6                
Dividend per preference share                                                   
(cents)                                        11.1          5.1     >100.0     
Number of shares in issue                                                       
(millions)                                    795.5        809.3      (1.7)     
Weighted average number of shares                                               
in issue (millions)                           809.9        802.4        0.9     
GROUP ANALYSIS                                                                  
Revenue                                                                         
Turnover                                   20 064.9     17 376.9       15.5     
Woolworths                                 18 146.5     16 022.9       13.3     
- Clothing and home                         7 409.8      6 985.0        6.1     
- Food                                     10 360.3      8 718.0       18.8     
- Logistics services and other                376.4        319.9       17.7     
Country Road                                1 918.4      1 354.0       41.7     
Interest                                    1 359.8      1 022.4       33.0     
Other revenue                                 328.9        242.6       35.6     
                                          21 753.6     18 641.9       16.7      
Operating profit                                                                
Woolworths                                  1 904.6      1 788.8        6.5     
Country Road                                  102.0         56.7       79.9     
                                           2 006.6      1 845.5        8.7      
consolidated statement of changes in equity                                     
Year ended 30 June                          Shareholders'          Minority     
                                         interest before     shareholders'      
                                              minorities          interest      
                                Note                  Rm                Rm      
Shareholders' interest at                                                       
the beginning of the year                         3 246.9              42.5     
Movements for the year:                                                         
Issue of shares                     7                20.4                 -     
Share repurchase                    7             (200.0)                 -     
Recognised gains and losses                         463.4               9.6     
Distributable reserves                              387.8               1.0     
Profit for the year                                 943.1               8.5     
Distributions to shareholders                     (629.8)             (5.7)     
Net fair value adjustments on                                                   
financial instruments                                 3.2             (1.8)     
Share-based payments                                 74.3                 -     
BEE transaction costs                               (3.0)                 -     
Non-distributable reserves                                                      
Exchange differences on                                                         
translation of                                                                  
foreign subsidiaries                                 75.6               8.6     
Shareholders' interest at the                                                   
end of the year                                   3 530.7              52.1     
                                                         Total       Total      
                                                          2008        2007      
                                                            Rm          Rm      
Shareholders' interest at                                                       
the beginning of the year                               3 289.4     2 634.2     
Movements for the year:                                                         
Issue of shares                                            20.4       111.8     
Share repurchase                                        (200.0)      (26.3)     
Recognised gains and losses                               473.0       569.7     
Distributable reserves                                    388.8       526.1     
Profit for the year                                       951.6     1 086.7     
Distributions to shareholders                           (635.5)     (550.4)     
Net fair value adjustments on financial                                         
instruments                                                 1.4      (31.0)     
Share-based payments                                       74.3        27.0     
BEE transaction costs                                     (3.0)       (6.2)     
Non-distributable reserves                                                      
Exchange differences on translation of                                          
foreign subsidiaries                                       84.2        43.6     
Shareholders' interest at the end of                                            
the year                                                3 582.8     3 289.4     
consolidated cash flow statement                                                
Year ended 30 June                                       2008          2007     
                                                          Rm            Rm      
Cash flow from operating activities                                             
Cash inflow from trading                              1 308.9       1 373.7     
Working capital movements                             (331.9)         183.6     
Cash applied to financial services assets              (24.4)     (1 182.4)     
Cash generated by operating activities                  952.6         374.9     
Interest received                                     1 351.1       1 018.3     
Finance costs paid                                    (489.7)       (366.6)     
Tax paid                                              (747.0)       (565.0)     
Cash generated by operations                          1 067.0         461.6     
Distributions to shareholders                         (635.5)       (550.4)     
Net cash inflow/(outflow) from operating activities     431.5        (88.8)     
Cash outflow from investing activities                (510.4)       (527.2)     
Cash flow from financing activities                                             
Shares issued                                            20.4         111.8     
Repurchase of shares                                  (200.0)        (26.3)     
Notes issued                                                -       1 015.0     
Notes redeemed                                        (436.0)       (300.0)     
BEE transaction costs                                   (3.0)         (6.2)     
Long-term borrowings raised                           1 500.0             -     
Long-term borrowings repaid                           (500.0)             -     
Net cash inflow from financing activities               381.4         794.3     
Increase in cash and cash equivalents                   302.5         178.3     
Cash and cash equivalents at the                                                
beginning of the year                                 (422.6)       (623.4)     
Effect of foreign exchange rate changes                  29.4          22.5     
Cash and cash equivalents at the end of the year       (90.7)       (422.6)     
GROUP ANALYSIS                                                                  
Cash inflow from trading                              1 308.9       1 373.7     
Woolworths                                            1 154.8       1 275.5     
Country Road                                            154.1          98.2     
Gross capital expenditure                               638.4         649.1     
Woolworths                                              538.9         591.1     
Country Road                                             99.5          58.0     
consolidated balance sheet                                                      
As at 30 June                                             2008         2007     
                                            Note           Rm           Rm      
ASSETS                                                                          
Non-current assets                                     2 798.1      2 977.2     
Property, plant and equipment                   6      1 810.7      1 543.9     
Investment property                                      105.9        105.9     
Intangible assets                               6        319.0        346.2     
Loans to customers                                           -        289.8     
Prepaid employment costs                                  45.5         61.4     
Participation in export partnerships                      66.3         70.4     
Other loans and prepayments                              153.6        186.4     
Derivative financial instruments                           3.1         29.9     
Deferred tax                                             294.0        343.3     
Current assets                                         3 023.7      7 465.3     
Inventories                                            1 371.4      1 202.6     
Woolworths card debtors                                      -      3 560.2     
Credit card receivables                                      -        904.8     
Trade and other receivables                              697.4        574.9     
Loans to customers                                           -        781.2     
Derivative financial instruments                          30.0          4.2     
Tax                                                       99.3         13.1     
Cash                                                     825.6        424.3     
Assets of disposal group classified as held                                     
for sale                                        8      5 440.0            -     
Total assets                                          11 261.8     10 442.5     
EQUITY AND LIABILITIES                                                          
Capital and reserves                                   3 582.8      3 289.4     
Interest of shareholders of the parent                 3 530.7      3 246.9     
Minority shareholders' interest                           52.1         42.5     
Non-current liabilities                                2 267.5      2 918.3     
Interest-bearing borrowings                            1 500.0      2 179.0     
Operating lease accrual                                  450.0        426.7     
Derivative financial instruments                             -         11.7     
Post-retirement medical aid liability                    251.2        227.2     
Deferred tax                                              66.3         73.7     
Current liabilities                                    3 209.4      4 234.8     
Trade and other payables                               1 998.7      2 067.2     
Provisions                                               213.3        156.3     
Derivative financial instruments                          27.0         13.5     
Tax                                                       54.1        214.9     
Overdrafts and short-term interest-bearing                                      
borrowings                                               916.3      1 782.9     
Liabilities of disposal group classified as                                     
held for sale                                   8      2 202.1            -     
Total equity and liabilities                          11 261.8     10 442.5     
Net asset book value - per share (cents)                 443.8        401.2     
GROUP ANALYSIS                                                                  
Total assets                                          11 261.8     10 442.5     
Woolworths                                            10 520.6      9 881.1     
Country Road                                             741.2        561.4     
Inventories                                            1 371.4      1 202.6     
Woolworths                                             1 154.0      1 023.1     
Country Road                                             217.4        179.5     
Approved commitments for capital expenditure             681.2        547.0     
Woolworths                                               486.1        396.0     
Country Road                                             195.1        151.0     
segmental analysis                                                              
Year ended 30 June                             2008         2007          %     
                                                Rm           Rm     change      
Revenue                                                                         
Retail                                                                          
Woolworths                                 18 242.1     16 099.5       13.3     
Country Road                                1 939.3      1 361.8       42.4     
Financial services                          1 662.9      1 274.4       30.5     
Intra-group                                  (90.7)       (93.8)                
Total group                                21 753.6     18 641.9       16.7     
Profit before tax and exceptional item                                          
Retail                                                                          
Woolworths                                  1 245.0      1 220.4        2.0     
Country Road                                  101.0         54.9       84.0     
Financial services                            158.1        191.5     (17.4)     
Total group                                 1 504.1      1 466.8        2.5     
Return on equity                                                                
Retail                                            %            %                
Woolworths                                     50.5         66.2                
Country Road*                                  18.1         34.6                
Financial services**                           10.0         14.3                
Total group                                    27.6         35.1                
*Return on equity decreased due to tax on profits, previously shielded by tax   
losses.                                                                         
**Return on equity for Woolworths Financial Services is calculated using the    
weighted average segmental equity for the year.                                 
notes                                                                           
1 Basis of preparation                                                          
The consolidated financial statements have been prepared in terms of the        
provisions of the South African Companies Act of 1973 (as amended) and IAS 34   
Interim Financial Reporting using accounting policies that are consistent with  
International Financial Reporting Standards (IFRS).                             
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 2007, except for the adoption of IFRS 7 Financial Instruments:          
Disclosure that became effective during the current year and had no impact on   
the reported results.                                                           
Headline earnings per share and diluted headline earnings per share have been   
calculated in terms of Circular 8/2007: Headline Earnings for both the current  
and prior year.                                                                 
3 Restatement of comparative figures                                            
Net bad debts and bad debt provisions are disclosed separately in the income    
statement for the current and comparative year. Previously these were included  
in                                                                              
other operating costs.                                                          
Segmental return on equity and profit before tax and exceptional items were     
restated due to a change in costs allocated to the Financial Services segment.  
Derivative financial assets have been separately disclosed on the face of the   
balance sheet for both the current and comparative year.                        
Computer software, previously included in property, plant and equipment, and    
goodwill are now disclosed as intangible assets.                                
None of these restatements had an impact on reported results.                   
4 Tax                                                                           
The effective tax rate of 36.7% (2007: 28.6%) is higher than the standard rate  
of normal tax mainly due to the impact of the non-deductible IFRS 2 charge      
arising from the group's BEE employee share ownership and executive share       
incentive schemes, and STC incurred on share buy-backs.                         
The lower effective rate in the prior year resulted from the recognition of a   
deferred tax asset relating to asset timing differences in a subsidiary         
company.                                                                        
5 Earnings per share                                                            
The difference between earnings per share and diluted earnings per share is the 
impact of outstanding options under the group share incentive schemes and       
preference shares issued in terms of the BEE employee share ownership scheme.   
6 Property, plant and equipment and intangible assets                           
During the year, the group acquired assets with a cost of R638.4m (2007:        
R652.1m).                                                                       
Assets with a net book value of R70.7m (2007: R90.1m) were disposed of by the   
group during the same period, resulting in a loss before tax of R0.8m (2007:    
profit of R56.1m).                                                              
7 Issue and repurchase of shares                                                
During the year, 4 074 229 (2007: 13 368 429) ordinary shares were issued in    
terms of the group's share incentive scheme.                                    
17 872 545 (2007: 1 268 051) shares were repurchased during the year.           
8 Disposal group                                                                
On 16 April 2008, the group announced plans to dispose of 50% plus one share of 
its interest in the issued share capital of Woolworths Financial Services       
(Proprietary) Limited to Absa Bank Limited.                                     
At 30 June 2008, the transaction was not completed; however, in the opinion of  
the directors, conclusion of the transaction is highly probable. As a result,   
the affected assets and liabilities are disclosed separately on the face of the 
balance sheet in terms of IFRS 5 Non-current Assets Held for Sale and           
Discontinued Operations.                                                        
The major classes of assets and liabilities of Woolworths Financial Services    
classified as held for sale at 30 June 2008 are as follows:                     
                                                                      2008      
                                                                        Rm      
Assets                                                                          
Loans to customers                                                  1 008.3     
Woolworths card debtors                                             3 451.6     
Credit card receivables                                               959.7     
Derivative financial instrument                                        20.4     
Assets classified as held for sale                                  5 440.0     
Liabilities                                                                     
Interest-bearing borrowings                                         2 179.0     
Derivative financial instrument                                        23.1     
Liabilities classified as held for sale                             2 202.1     
Net assets classified as held for sale                              3 237.9     
Refer to note 12.1                                                              
9 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.                                
10 The Woolworths Black Economic Empowerment Employee Share Ownership Scheme    
During the year ended 30 June 2008, 88 267 306 convertible, redeemable, non     
-cumulative participating preference shares were issued to employees of the     
group in terms of the Woolworths Black Economic Empowerment Employee Share      
Ownership Scheme.                                                               
This resulted in an additional share-based payment charge of R53.8m being       
recognised in employment costs.                                                 
The ordinary shares expected to be issued at the redemption of the preference   
shares resulted in additional dilution of 1.8% in the weighted average number   
of shares for the year ended June 2008.                                         
11 Borrowing facilities                                                         
Unutilised banking facilities amount to R2 875.1m (2007: R2 530.0m). In terms   
of the Articles of Association, there is no limit on the group's authority to   
raise interest-bearing debt.                                                    
12 Events subsequent to balance sheet date                                      
12.1 Disposal of 50% plus one share of Woolworths Financial Services            
(Proprietary)                                                                   
Limited                                                                         
Competition Tribunal authorisation for the transaction discussed in note 8 was  
obtained on 17 July 2008. Certain conditions precedent to the sale agreement    
still have to be fulfilled before the transaction is completed. The directors   
expect that the transaction will be concluded by 30 September 2008.             
The disposal of 50% plus one share of our interest in Woolworths Financial      
Services (Proprietary) Limited to Absa Bank Limited meets the definition of a   
non-adjusting post-balance sheet event in IAS 10 Events After the Balance       
Sheet Date.                                                                     
12.2 Repurchase and cancellation of treasury shares                             
The repurchase and cancellation of treasury shares held by E-Com (Proprietary)  
Limited was authorised at a general shareholders' meeting on 18 August 2008.    
13 Related party transactions                                                   
During the year ended 30 June 2008, group companies entered into various        
related party transactions. These transactions were entered into in the ordinary
course of business and under terms that are no less favourable than those       
arranged with independent third parties. All such intra-group related party     
transactions and outstanding balances are eliminated in preparation of the      
consolidated financial statements of the group.                                 
14 Audit opinion                                                                
These abridged consolidated 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.                                                    
15 Approval of annual financial statements                                      
The annual financial statements were approved by the board of directors on 20   
August 2008.                                                                    
commentary                                                                      
Group results                                                                   
Group turnover grew by 15.5% for the fifty three weeks ended 30 June 2008, with 
lower growth in the second half reflecting the further slowdown in South        
African consumer spending.                                                      
Gross margin increased from 34.4% to 34.8%.                                     
Profit before exceptional items and the BEE charge grew by 6.2% to R1.6bn       
despite the higher bad debt.                                                    
Interest paid increased by 32.7% as a result of growth of 12.7% in the average  
financial services books and the higher cost of borrowings.                     
The effective tax rate increased from 28.6% to 36.7%, mainly due to the         
recognition                                                                     
last year of both the sale of land and the Country Road deferred tax asset, as  
well                                                                            
as STC on the share repurchases and the BEE charge in the current year.         
Adjusted headline earnings per share increased by 4.3% to 124.8 cents per       
share.                                                                          
A final ordinary dividend of 49.5 cents per share has been declared. The total  
dividend per share for the year amounts to 79.0 cents.                          
operating review                                                                
Woolworths                                                                      
Trading environment                                                             
Despite an optimistic early start to the year, trading conditions steadily      
worsened as higher interest rates and increases in fuel and food prices were    
felt by consumers. The interest increase in September 2007 had a significant    
effect on                                                                       
consumer spending and the deterioration in consumer spend has continued to      
increase. In line with international trends, middle and upper income customers  
have been hard hit as household debt burdens increased materially.              
Retail                                                                          
Overall sales grew by 13.3% reflecting the relative decline in disposable       
income in Woolworths core customer base. Clothing and general merchandise       
sales grew by 6.1%. Kidswear was the only category to show real improvement     
on the prior year. Average clothing and general merchandise inflation for       
the year of 8.5% (down from 9.6% in the first half) demonstrated the heightened 
focus on value, especially at opening price points.                             
Woolworths food sales gained 18.8% for the full year but showed slower growth   
in the second half of the year, as newly acquired middle-income Woolworths      
food customers became increasingly cautious with their diminishing disposable   
income. Our prices on more basic supermarket commodities have been sharpened    
and are now highly competitive. Inflation averaged 13.1% but is now coming off  
its highs.                                                                      
Costs in the second half grew by 10.6% (first half: 18.4%).                     
Trading space                                                                   
Trading space growth slowed and the focus shifted to fewer, larger format food  
stores and essential full line stores. Total footage grew by 7.3%, with an      
increase of 4.8% in clothing and general merchandise space and 14.4% in food    
footage. This new footage has added significant cost to the business and should 
be profit enhancing into the future.                                            
Financial services                                                              
Income for the period increased by 30.5% to R1.7bn. Interest yields grew by     
3.6% to 23.5%.                                                                  
Net bad debts including recovery costs increased to 7.9% (2007: 4.9%) of the    
gross book. There are some early indications that the level of bad debts may    
be stabilising.                                                                 
Country Road                                                                    
Country Road out-performed the market, delivering revenue growth of 22.0% and   
growing pre-tax profit by 54.8% in Australian dollars.                          
Outlook                                                                         
The economic environment, especially for Woolworths core customers, is tough and
we expect this to continue through this coming year. The business is driving    
sales through sharper pricing whilst continuing to improve quality and          
innovation. In these times of uncertain growth our focus will remain on         
rigorously controlling costs.                                                   
Changes to the board of directors                                               
On 31 May 2008 Richard Inskip resigned as a director. The board would like to   
thank Richard for his valuable contribution and wish him every success in his   
future ventures.                                                                
On 31 July 2008 Judy Dlamini resigned as a director and the board would like to 
thank her for her services.                                                     
DA Hawton         SN Susman                                                     
Chairman          Chief executive officer                                       
Cape Town, 20 August 2008                                                       
dividend declaration                                                            
Notice is hereby given that the directors have declared a final cash dividend   
of 49.5 cents per ordinary share for the six months ended 30 June 2008.         
The salient dates for the dividend will be as follows:                          
Last day to trade to receive dividend                                           
Friday, 5 September 2008                                                        
Shares commence trading "ex" dividend                                           
Monday, 8 September 2008                                                        
Record date                                                                     
Friday, 12 September 2008                                                       
Payment date                                                                    
Monday, 15 September 2008                                                       
Share certificates may not be dematerialised or rematerialised between Monday,  
8 September 2008 and Friday, 12 September 2008, both days inclusive.            
In accordance with the company's articles of association, dividends amounting   
to less than R5.00 due to any one holder of the company's ordinary shares held  
in certificated form will not be paid, unless otherwise requested in writing,   
but will be aggregated with other such amounts and be donated to a charity      
nominated by the directors.                                                     
A final cash dividend of 7.9 cents per preference share for the six months      
ended 30 June 2008 will be paid to the beneficiaries of the Woolworths Employee 
Share Ownership Scheme on 15 September 2008.                                    
CL Lowe                                                                         
Group secretary                  Cape Town, 20 August 2008                      
directorate and statutory information                                           
Non-executive directors:                                                        
Buddy Hawton (Chairman), Peter Bacon (British), Nigel Colne (British), Brian    
Frost, Mike Leeming, Chris Nissen, Sindi Zilwa                                  
Executive directors:                                                            
Simon Susman (CEO), 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 (Pty) Limited, 70 Marshall Street, Johannesburg 
2001                                                                            
Date: 21/08/2008 08:00:06 Produced by the JSE SENS Department.                  
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