2011/08/25
WHL - Woolworths Holdings Limited - Abridged audited group results for the year [JSE Securities Exchange - SENS]
 
WOWOW                                                                           
WHL - Woolworths Holdings Limited - Abridged audited group results for the year 
ended 26 June 2011 and cash dividend declaration                                
WOOLWORTHS HOLDINGS LIMITED                                                     
(Incorporated in the Republic of South Africa)                                  
Registration number: 1929/001986/06                                             
Share code: WHL                                                                 
ISIN: ZAE000063863                                                              
ABRIDGED AUDITED GROUP RESULTS FOR THE YEAR ENDED 26 JUNE 2011 AND CASH         
DIVIDEND DECLARATION                                                            
HIGHLIGHTS                                                                      
- TURNOVER UP 9.4%                                                              
- PROFIT BEFORE TAX UP 31.1%                                                    
- HEADLINE EARNINGS PER SHARE UP 30.6%                                          
- ADJUSTED HEADLINE EARNINGS PER SHARE UP 36.7%                                 
- RETURN ON EQUITY INCREASED FROM 39.4% TO 44.1%                                
- DIVIDEND PER SHARE UP 36.7%                                                   
- CONTINUED MARKET SHARE GAINS                                                  
COMMENTARY                                                                      
GROUP RESULTS                                                                   
The group had an excellent year with turnover up 9.4% compared to the prior     
year and profit before tax and adjusted headline earnings per share up 31.1%    
and 36.7% respectively.                                                         
The group's return on equity increased from 39.4% to 44.1%. Shares to the value 
of R339m were repurchased during the year and since the year end shares to the  
value of a further R275m have been repurchased.                                 
A final dividend of 93.0 cents per share has been declared taking the total     
distribution to 143.5 cents, an increase of 36.7% on the prior year.            
WOOLWORTHS                                                                      
During the course of the year sales grew by 10.0% (comparable 7.9%).            
Clothing and General merchandise sales grew by 8.6% (comparable 7.3%). Clothing 
and Footwear sales in South Africa performed particularly well increasing by    
11.5% (comparable 9.4%).                                                        
On a 12 month moving average basis, Clothing and Footwear sales grew at 10.6%   
compared to a market growth of 9.5%.                                            
General merchandise sales decreased by 2.7% following our decision to           
rationalise the unprofitable cellular handset business. Excluding this, sales   
grew by 5.2%.                                                                   
Strong margin improvement in the Clothing and General merchandise business      
(40.0% to 43.7%) resulted in a return on sales of 15.3% against 12.3% last      
year.                                                                           
Food also experienced strong growth for the year with sales up 10.7% (8.4%      
comparable). On average for the 12 month period Woolworths outperformed the     
market by 4.1%.                                                                 
The return on sales in the Food business increased from 3.8% to 4.8% primarily  
due to improved sourcing.                                                       
Corporate retail space grew by 7.6%, which included franchise conversions which 
largely occurred towards the end of the year.                                   
Franchise                                                                       
During the year the group made an offer to its franchisees to purchase their    
rights and stores and convert them to company owned and operated stores.        
At the year end 23 stores had been acquired at a cost of R250m. Since the       
year end a further 31 stores have been acquired at a cost of R384m.             
COUNTRY ROAD                                                                    
Sales were a disappointing 1.2% up on the previous year (comparable down 8.6%). 
Sales in Australia were 2% down (comparable down 10.9%) reflecting the very     
challenging trading conditions in that country offset by an increase of 24% in  
South Africa (comparable 7.9%) where the Country Road and Trenery brands        
continue to perform well.                                                       
Costs were well managed and better sourcing and a strong Australian dollar      
resulted in operating margin improving from 5.2% to 5.6%.                       
Profit for the year under review was 9.5% up on the previous year.              
WOOLWORTHS FINANCIAL SERVICES                                                   
The joint venture with ABSA performed well with operating profit up 82.3%       
compared to the prior year. The quality of the debtors book has improved        
significantly with the impairment charge expressed as a percentage of gross     
receivables reducing from 5.1% to 1.4%.                                         
The overall debtors book increased by 4.8% over the prior year and the return   
on equity increased from 13.9% to 23.5% as a result of the lower impairment     
charge.                                                                         
OUTLOOK                                                                         
The economic challenges facing the United States and the Eurozone are likely    
to have a negative impact on the rate of growth of the South African economy    
and in particular consumer confidence. It is expected therefore that trading    
conditions will be tougher in the second half of the year. The group will       
however continue to benefit from improved sourcing, tight cost control as well  
as the full year integration of the franchise stores.                           
CHANGES TO THE BOARD OF DIRECTORS                                               
Buddy Hawton, having served nine years as Chairman, has indicated his intention 
to retire from the board after the annual general meeting in November 2011.     
The board has elected to appoint Simon Susman, currently Deputy chairman, as    
Chairman following Mr Hawton's retirement. The role of Deputy chairman will     
then cease to exist.                                                            
As Mr Susman held the role of Chief executive officer within the prior three    
year period and holds a significant number of shares, he will, in line with the 
recommendations of King III, be classified as a non-independent Chairman.       
The board has consequently appointed a Lead independent director to act in cases
where the Chairman is conflicted. Tom Boardman has been appointed to this role. 
These appointments will be effective from after the annual general meeting      
on                                                                              
17 November 2011.                                                               
The board wishes to express its deep thanks to Mr Hawton for the significant    
contribution that he has made to the company.                                   
DA Hawton              I Moir                                                   
Chairman               Group chief executive officer                            
Cape Town, 24 August 2011                                                       
DIVIDEND DECLARATION                                                            
Notice is hereby given that the directors have declared a final cash dividend   
of 93.0 cents per ordinary share for the year ended 26 June 2011.               
The salient dates for the dividend will be as follows:                          
Last day to trade to receive a dividend               Friday, 9 September 2011  
Shares commence trading "ex" dividend                Monday, 12 September 2011  
Record date                                          Friday, 16 September 2011  
Payment date                                         Monday, 19 September 2011  
Share certificates may not be dematerialised or rematerialised between Monday,  
12 September 2011 and Friday, 16 September 2011 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 44.6 cents per preference share for the year ended     
26 June 2011 will be paid to the beneficiaries of the Woolworths Employee Share 
Ownership Scheme on Monday, 19 September 2011.                                  
CL Lowe                                                                         
Group secretary                                                                 
Cape Town, 24 August 2011                                                       
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                  
                                                          Restated              
                                             52 weeks     52 weeks              
                                                   to           to              
                                              26 June      27 June              
                                                 2011         2010          %   
                                   Notes           Rm           Rm     change   
Revenue                                         25 841       23 663        9.2  
Turnover                                        25 582       23 393        9.4  
Cost of sales                         3.1       16 683       15 619        6.8  
Gross profit                                     8 899        7 774       14.5  
Other revenue                                      127           95       33.7  
Expenses                                         6 904        6 215       11.1  
Store costs                                      4 448        3 988       11.5  
Other operating costs                 3.1        2 456        2 227       10.3  
Operating profit                                 2 122        1 654       28.3  
Investment income                                  132          175     (24.6)  
Finance costs                                       84          151     (44.4)  
Profit before earnings from joint                                               
ventures and associate                           2 170        1 678       29.3  
Earnings from joint ventures                       129           75       72.0  
Earnings from associate                              7            6       16.7  
Profit before tax                                2 306        1 759       31.1  
Tax                                                659          491       34.2  
Profit after tax                                 1 647        1 268       29.9  
Other comprehensive income:                                                     
Net fair value adjustments on                                                   
financial instruments, after tax                  (17)           40       <100  
Exchange differences on translation                                             
of foreign subsidiaries                             37           13       >100  
Other comprehensive income for the                                              
year, net of tax                                    20           53     (62.3)  
Total comprehensive income for the year          1 667        1 321       26.2  
Profit attributable to:                          1 647        1 268       29.9  
Shareholders of the parent                       1 631        1 258       29.7  
Non-controlling interest                            16           10       60.0  
Total comprehensive income attributable to:      1 667        1 321       26.2  
Shareholders of the parent                       1 651        1 304       26.6  
Non-controlling interest                            16           17      (5.9)  
Reconciliation of headline earnings                                             
Earnings attributable to                                                        
shareholders of the parent                       1 631        1 258       29.7  
BEE preference dividend paid                        19           11       72.7  
Basic earnings                                   1 612        1 247       29.3  
Loss on disposal of property, plant                                             
and equipment                                        4           24     (83.3)  
Impairment of property, plant and                                               
equipment                                           24            -             
Tax impact of adjustments                          (8)          (7)       14.3  
Headline earnings                                1 632        1 264       29.1  
Abnormal foreign exchange related gain               -         (57)    (100.0)  
Adjusted headline earnings                       1 632        1 207       35.2  
Headline earnings per share (cents)              214.9        164.6       30.6  
Earnings per share (cents)              5        212.2        162.4       30.7  
Adjusted headline earnings per                                                  
share (cents)                                    214.9        157.2       36.7  
Diluted headline earnings per share                                             
(cents)                                          209.8        159.3       31.7  
Diluted earnings per share (cents)      5        207.2        157.2       31.8  
Adjusted diluted headline earnings                                              
per share (cents)                                209.8        152.2       37.8  
Number of shares in issue (millions)             755.2        759.5      (0.6)  
Weighted average number of shares                                               
in issue (millions)                              759.5        768.0      (1.1)  
CONSOLIDATED STATEMENT OF FINANCIAL POSITION                                    
                                                               At          At   
                                                          26 June     27 June   
                                                             2011        2010   
                                                Notes          Rm          Rm   
ASSETS                                                                          
Non-current assets                                           4 115       3 633  
Property, plant and equipment                        6       2 046       1 991  
Investment properties                                          121         121  
Intangible assets                                    6         693         392  
Investment in associate                                         46          40  
Investment in joint ventures                                   578         574  
Prepaid employment costs                                        23          29  
Participation in export partnerships                            59          63  
Other loans                                                     84          95  
Derivative financial instruments                                 -           1  
Deferred tax                                                   465         327  
Current assets                                               4 950       5 377  
Inventories                                                  1 892       1 676  
Trade and other receivables                                    733         759  
Derivative financial instruments                                10          19  
Tax                                                             22           6  
Cash                                                         2 293       2 917  
Total assets                                                 9 065       9 010  
EQUITY AND LIABILITIES                                                          
Capital and reserves                                         4 093       3 453  
Interest of shareholders of the parent                       4 008       3 396  
Non-controlling interest                                        85          57  
Non-current liabilities                                      1 460       1 362  
Interest-bearing borrowings                                    514         521  
Operating lease accrual                                        455         447  
Derivative financial instruments                                 -          15  
Post-retirement medical benefit liability                      315         292  
Deferred tax                                                   176          87  
Current liabilities                                          3 512       4 195  
Trade and other payables                                     3 148       2 608  
Provisions                                                     269         248  
Derivative financial instruments                                78          20  
Tax                                                              1         285  
Interest-bearing borrowings                                     16       1 034  
Total equity and liabilities                                 9 065       9 010  
Net asset book value - per share (cents)                       531         447  
GROUP ANALYSIS                                                        Restated  
Total assets                                                 9 065       9 010  
Woolworths Retail                                            5 719       5 145  
Country Road                                                   986         850  
Treasury                                                     1 783       2 442  
Woolworths Financial Services                                  577         573  
Inventories                                                  1 892       1 676  
Woolworths Retail                                            1 547       1 354  
Country Road                                                   345         322  
Approved commitment for capital expenditure                    934         786  
Woolworths Retail                                              809         652  
Country Road                                                   125         134  
Approved commitment for franchise acquisitions         12      384           -  
CONSOLIDATED STATEMENT OF CASH FLOWS                                            
                                                      52 weeks       52 weeks   
                                                            to             to   
26 June       27 June                                                           
                                                          2011           2010   
                                                            Rm             Rm   
Cash flow from operating activities                                             
Cash inflow from trading                                  2 848          2 210  
Working capital movements                                   377            215  
Cash generated by operating activities                    3 225          2 425  
Investment income                                           123            167  
Finance costs                                              (95)          (152)  
Tax paid                                                  (985)          (367)  
Cash generated by operations                              2 268          2 073  
Dividends received from associate                             1              1  
Dividends received from joint venture                       125             35  
Distributions to shareholders                             (923)          (725)  
Net cash inflow from operating activities                 1 471          1 384  
Cash flow from investing activities                                             
Net investment in PPE and intangible assets               (585)          (543)  
Acquisition of franchise operations                       (207)              -  
Other                                                        21             39  
Net cash outflow from investing activities                (771)          (504)  
Cash flow from financing activities                                             
Shares issued                                                33             47  
Shares repurchased                                        (339)          (410)  
Share repurchase costs                                      (1)            (1)  
Finance lease payments                                     (18)           (20)  
Short-term borrowings (repaid)/raised                   (1 020)             20  
Acquisitions - non-controlling interest contribution         17              -  
Net cash outflow from financing activities              (1 328)          (364)  
(Decrease)/ Increase in cash and cash equivalents         (628)            516  
Cash and cash equivalents at the beginning of the year    2 917          2 391  
Effect of foreign exchange rate changes                       4             10  
Cash and cash equivalents at the end of the year          2 293          2 917  
GROUP ANALYSIS                                                        Restated  
Cash inflow from trading                                  2 848          2 210  
Woolworths Retail                                         2 586          1 986  
Country Road                                                262            224  
Gross capital expenditure                                   624            607  
Woolworths Retail                                           517            460  
Country Road                                                107            147  
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                                     
                                                       Share-                   
                                                      holders            Non-   
                                                       of the     controlling   
                                                       parent        interest   
                                            Notes          Rm              Rm   
Interest at the beginning of the year                    3 396              57  
Movements for the year:                                                         
Issue of shares                                  8          33               -  
Shares repurchased                               8       (339)               -  
Share repurchase costs                                     (1)               -  
Distributions to shareholders                            (918)             (5)  
Share-based payments                                       186               -  
Business acquisitions                                        -              17  
Total comprehensive                                                             
income for the year                                      1 651              16  
Interest at the end of the year                          4 008              85  
Distribution per ordinary share (cents)                                         
Distribution cover (based on headline earnings                                  
per share)                                                                      
Distribution per preference share (cents)                                       
                                                         Total          Total   
                                                      52 weeks       52 weeks   
                                                            to             to   
                                                       26 June        27 June   
                                                          2011           2010   
                                                            Rm             Rm   
Interest at the beginning of the year                     3 453          3 072  
Movements for the year:                                                         
Issue of shares                                              33             47  
Shares repurchased                                        (339)          (410)  
Share repurchase costs                                      (1)            (1)  
Distributions to shareholders                             (923)          (725)  
Share-based payments                                        186            149  
Business acquisitions                                        17              -  
Total comprehensive income for the year                   1 667          1 321  
Interest at the end of the year                           4 093          3 453  
Distribution per ordinary share (cents)                   143.5          105.0  
Distribution cover (based on headline earnings                                  
per share)                                                  1.5            1.5  
Distribution per preference share (cents)                  61.4           30.8  
SEGMENTAL ANALYSIS                                                              
                                                          Restated              
                                             52 weeks     52 weeks              
                                                   to           to              
                                              26 June      27 June              
                                                 2011         2010          %   
                                   Notes           Rm           Rm     change   
Revenue                                                                         
Turnover                                        25 582       23 393        9.4  
Woolworths Retail                               22 609       20 557       10.0  
Clothing and General merchandise      3.2        8 591        7 913        8.6  
Food                                            13 535       12 227       10.7  
Logistics                                          483          417       15.8  
Country Road                          3.2        2 973        2 836        4.8  
Other revenue and investment income                259          270      (4.1)  
Woolworths Retail                                  103           86       19.8  
Clothing and General merchandise      3.2           25           21       19.0  
Food                                                78           65       20.0  
Country Road                          3.2           27           25        8.0  
Treasury                                           129          175     (26.3)  
Intra-group revenue                                  -         (16)    (100.0)  
Total group                                     25 841       23 663        9.2  
Gross profit                                                                    
Woolworths Retail                                7 134        6 192       15.2  
Clothing and General merchandise      3.2        3 751        3 164       18.6  
Abnormal foreign exchange related gain               -           79    (100.0)  
Food                                             3 298        2 872       14.8  
Intra-group                                         85           77       10.4  
Country Road                          3.2        1 765        1 582       11.6  
Total group                                      8 899        7 774       14.5  
Profit before tax                                                               
Woolworths Retail                                1 965        1 514       29.8  
Clothing and General merchandise      3.2        1 318          971       35.7  
Abnormal foreign exchange related gain               -           79    (100.0)  
Food                                               647          464       39.4  
Country Road                          3.2          162          142       14.1  
Woolworths Financial Services                      129           75       72.0  
Treasury                                            50           28       78.6  
Total group                                      2 306        1 759       31.1  
NOTES                                                                           
1 Basis of preparation                                                          
The abridged group financial statements comply with IAS 34 Interim Financial    
Reporting. These abridged group financial statements do not contain all the     
information and disclosures required in the annual financial statements.        
Accounting policies used in the abridged group financial statements are the     
same as those used to prepare the group annual financial statements, which      
have been prepared in compliance with International Financial Reporting         
Standards (IFRS) and the South African Companies Act (71 of 2008, as amended).  
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 27 June 2010, except for the adoption of the following IFRS, IFRIC        
interpretations, amendments and circulars that became effective during the      
current year. These changes had no significant impact on the reported results   
other than giving rise to additional disclosures and a revision to the          
relevant accounting policies:                                                   
- IFRS 2 (Revised) - Share-based Payment: Group Cash-settled share based        
payment arrangements                                                            
- IFRS 3 (Revised) - Business Combinations                                      
3 Reclassification of comparative figures                                       
3.1 Marketing expenses of R37m previously disclosed in cost of sales have       
been included in other operating costs.                                         
3.2 The results, cash flows and net assets of Country Road South Africa,        
previously recorded in the C&GM segment, have been included in the Country      
Road segment in line with a change in operational structure.                    
These reclassifications have had no impact on the group operating profit.       
4 Segmental analysis                                                            
To increase transparency and comparability of revenue, the group has included   
additional voluntary disclosure of revenue from logistics services.             
5 Earnings per share                                                            
The difference between earnings per share and diluted earnings per share is     
due to the impact of outstanding options under the group share incentive        
schemes.                                                                        
6 Property, plant and equipment and intangible assets                           
During the financial year, the group acquired property, plant and equipment     
with a cost of R527m (2010: R500m) and acquired intangible assets (including    
goodwill and reacquired rights) with a cost of R377m (2010: R107m).             
7 Acquisition of franchise operations                                           
On 2 September 2010 the group announced its decision to wind down its South     
African franchise operations and made offers to purchase all local franchise    
stores. These offers expired on 26 June 2011. In line with this decision, the   
group acquired 23 franchise stores for a cash consideration of R250m.           
Period                                                         Stores     Cost  
27 September 2010 to                                                            
26 December 2010                                                    7       50  
27 December 2010 to                                                             
27 March 2011                                                       6       68  
27 March 2011 to                                                                
26 June 2011                                                       10      132  
                                                                  23      250   
Fair value of assets acquired at                                                
the date of acquisition                                                     Rm  
Property, plant and equipment                                                8  
Reacquired rights                                                          138  
Deferred tax liability                                                    (39)  
                                                                          107   
Goodwill arising on acquistion                                              Rm  
Consideration                                                              250  
Less: Fair value of identifiable net assets                                107  
                                                                          143   
From the dates of the acquisitions, the franchise stores have contributed       
R171m of revenue and R26m to the profit before tax of the group.                
Had the acquisition of the acquired franchisees been effected at the beginning  
of the year, the revenue of the group for the 52 weeks ended 26 June 2011       
would have been R345m higher and the profit before tax for the year would have  
increased by R80m. The directors of the group consider these pro-forma numbers  
to represent an approximate measure of the performance of the combined group    
and to provide a reference point for comparison in future periods.              
8 Issue and repurchase of shares                                                
During the current financial year, 3 945 838 (2010: 6 172 402) ordinary         
shares  amounting to R33m (2010: R47m) were issued in terms of the group's      
executive share incentive scheme.                                               
1 122 568 (2010: 4 061 222) shares amounting to R28m (2010: R87m) were          
repurchased from the market by Woolworths (Proprietary) Limited and held as     
treasury shares by the group. 7 056 052 (2010: nil) shares amounting to R193m   
(2010: nil) were repurchased from the market and cancelled.                     
3 998 422 (2010: nil) shares amounting to R118m (2010: nil) were purchased      
from the market in the current year and allocated to employees on settlement    
of share-based payments.                                                        
In the prior year, 17 378 892 shares amounting to R323m were repurchased        
from the market by E-Com (Proprietary) Limited and are held as treasury         
shares by the group.                                                            
9 Contingent liabilities                                                        
There are no contingent liabilities.                                            
10 Borrowing facilities                                                         
Unutilised banking facilities amount to R2 049m (2010: R2 443m). There is       
no limit in the articles of association on the group's authority to raise       
interest-bearing debt.                                                          
11 Related party transactions                                                   
The group entered into related party transactions during the year. Information  
regarding the related parties is included in the annual financial statements.   
12 Events subsequent to the year-end                                            
An additional 16 stores amounting to R155m have been purchased between the      
year-end and the date of approval of the financial statements. The initial      
accounting for these acquisitions are incomplete as at the date of this         
report. Had the acquisition of the acquired franchisees been effected at the    
beginning of the year, the revenue of the group for the 52 weeks ended 26       
June 2011 would have been R123m higher, and the profit before tax for the       
year would have increased by R49m.The directors of the group consider           
these pro-forma numbers to represent an approximate measure of the              
performance of the combined group and to provide a reference point for          
comparison in future periods. Agreements to purchase a further 15 stores        
amounting to R229m are effective from dates subsequent to this report.          
13 Approval of annual financial statements                                      
The annual financial statements were approved by the board of directors on      
24 August 2011.                                                                 
14 Audit opinion                                                                
These abridged consolidated group financial statements have been extracted      
from the audited annual financial statements upon 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.                              
DIRECTORATE AND STATUTORY INFORMATION                                           
Non-executive directors:                                                        
Buddy Hawton (Chairman), Simon Susman (Deputy chairman),                        
Peter Bacon (British), Tom Boardman, Lindiwe Bakoro, Mike Leeming,              
Chris Nissen, Sir Stuart Rose (British), Thina Siwendu, Sindi Zilwa             
Executive directors:                                                            
Ian Moir (Group chief executive officer)(Australian), Zyda Rylands,             
Norman Thomson                                                                  
Group secretary: Cherrie Lowe                                                   
Share code: WHL                   ISIN: ZAE000063863                            
Registered address:                                                             
PO Box 680, Cape Town 8000                                                      
Woolworths House, 93 Longmarket Street, Cape Town 8001                          
Registration number: 1929/001986/06                                             
JSE sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)          
Transfer secretaries:                                                           
Computershare Investor Services (Pty) Limited                                   
70 Marshall Street, Johannesburg 2001                                           
visit our investor relations site: www.woolworthsholdings.co.za                 
Date: 25/08/2011 07:06:23 Produced by the JSE SENS Department.                  
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Source: JSE Securities Exchange - SENS
 
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