Dear Shareholder
 
I am delighted to be able to write my first statement as Chairman of Woolworths at the end of yet another exceptional year for which I must congratulate the management team and staff for their concerted and focused efforts.

Woolworths, I have discovered, is full of passionate and dedicated people who are strongly influenced by the shared values and principles that are the foundation of this business.  I am proud to be associated with the Woolworths group and the deep commitment surrounding the brand.

the results
All the Woolworths divisions – Clothing and Home, Foods and Financial Services – contributed to the excellent growth and delivered increasing returns to shareholders.  We still need significant improvement in the homeware and childrenswear departments and I am confident that we will see such improvement in the forthcoming year.  The franchise business exceeded the R1bn revenue level and Country Road produced a small profit.

Headline earnings increased 35% over the previous year and headline earnings per share are up 40% from continuing operations.  Consistent, year-on-year growth in our individual businesses continues to be a strong focus.

Woolworths Africa and Middle East operations should continue to grow with further improvements in all products, tighter cost control, better merchandising and an aggressive store roll-out programme.  In Australasia, Country Road’s strategy to focus efforts on a single wholesaler and roll-out more retail stores will put Country Road in a stronger position to increase penetration in their niche market.

economic impact
In South Africa, despite the rising prices and high interest rates throughout the year, consumer demand during the first half of our financial year was better than expected.  However, the effects of inflation and continually high interest rates did impact on customers’ disposable income from early 2003.

We expect the recent interest rate cuts and the possibility of further cuts within the next six months to restore consumer confidence.

In the Gulf, the war and the ongoing regional tensions affected trading but this was tempered by above-expected sales in our Africa franchise operations.  We expect the Middle East to remain difficult but expect to see continued growth in the Africa region.

Trading conditions in Australia are expected to remain tight with static consumer spend in an extremely competitive retail environment.

governance
Woolworths has always been a company driven by a strong set of values and principles and a legacy of doing the right thing.  This business approach has been highly advantageous for the company and underpins Woolworths approach to corporate governance, providing a commonly understood framework within which policies and practices are continually reviewed.

A formalised risk management system was introduced during the year to better identify and evaluate risks.  This process will greatly assist in balancing risk and reward within a framework of pursuing high growth and maximising opportunities.

Our employment policies, supplier sourcing and supplier development programmes, and our approach to franchisee selection, support our firm belief that, as a truly South African business, we have a responsibility to assist in addressing the inequalities of the past.  Although we have made significant in-roads, we recognise that we still have much to achieve in the creation of opportunity and empowerment.

The recently established sustainability forum is committed to achieving a balance between economic performance and the group’s impact on the society and environment in which we operate.  Every product and service we offer bears testimony to our aim to continue to be an actively responsible organisation.  We distributed in excess of R100m of surplus food and clothing this year to the needy over and above our social investment expenditure which is allocated through the newly-formed Woolworths Trust.

looking ahead
We have a strong base off which to grow, three good years of consistent growth behind us and dedicated and passionate teams of people in our stores, our offices and our supply bases.  Our business objective remains simple, to continue to buy the right goods that exceed our customers’ expectations and to deliver these in an innovative and exciting shopping experience.

thanks
I’d like to thank my colleagues on the board for the warm welcome extended to me and congratulate them on the excellent results that we proudly achieved in the financial year ended June 2003.  We are well placed to continue to achieve growth in the year ahead and I have every confidence that our executive directors, under the capable leadership of Simon Susman, together with our experienced team of nonexecutive directors, will continue to add substantial value to the Woolworths brand.

 
 

DA Hawton
Chairman