directors’ report
nature of business
Woolworths Holdings Limited is an investment holding company, listed on the JSE Limited securities exchange and operates mainly through three subsidiaries, Woolworths (Proprietary) Limited, Woolworths Financial Services (Proprietary) Limited and Country Road Limited.
Woolworths (Proprietary) Limited is a retail chain of stores offering a selected range of clothing, food and general merchandise, mainly under its own brand name. Woolworths has 385 corporate and franchise stores throughout South Africa, Africa and the Middle East. Woolworths Financial Services offers a range of financial products to Woolworths customers.
Country Road Limited is listed on the Australian Securities Exchange and offers a range of clothing and homeware. Country Road Limited has 61 retail stores and 78 concession retail outlets across Australia and New Zealand.
The nature of the business of the subsidiaries held directly and indirectly is set out here.
review of financial results and activities
Reviews of the financial results and the activities of the group are contained in the Chairman’s letter, the Chief executive officer’s report, the Director: Finance’s report, the reviews of operations and the annual financial statements.
share capital
authorised share capital
The authorised share capital of the company remained unchanged during the year, being:
| 1 410 600 000 ordinary shares of 0.15 cent each : | R2 115 900 |
| 89 400 000 convertible, redeemable, non-cumulative participating preference shares of 0.15 cent each: |
R134 100 |
| R2 250 000 |
changes in issued share capital
The following changes in the issued ordinary share capital took place during the year under review:
| 2008 | 2007 | |
| Shares in issue at the beginning of the year | 896 191 467 | 884 091 089 |
| Shares issued in terms of the share option/purchase scheme | 4 074 229 | 13 368 429 |
| Shares repurchased and cancelled | (17 872 545) | (1 268 051) |
| Shares in issue at the end of the year | 882 393 151 | 896 191 467 |
Details of the authorised and issued share capital are included in the notes to the financial statements.
There were no changes to the number of issued convertible, redeemable, non-cumulative participating preference shares of 0.15 cent each which are held by The Woolworths Employee Share Ownership Trust.
repurchase of shares
In terms of the articles of association and the general authority granted by shareholders on 22 November 2007, the company was authorised until the next annual general meeting to acquire shares issued by the company, provided that the aggregate of such acquisitions did not exceed 20% of the issued share capital of that class in any one financial year, and subject to the requirements of the Companies Act, (No. 61 of 1973), as amended and the JSE Listings Requirements. During the year 17 872 545 ordinary shares were repurchased on the open market. These shares were subsequently cancelled.
treasury shares
There were 86 871 694 treasury shares held by E-Com Investments 16 (Proprietary) Limited, a 100% owned subsidiary of the company as at 30 June 2008. Subsequent to the year end, on 18 August 2008 shareholders approved a special resolution at a general meeting authorising the company to repurchase these treasury shares at a price of R9.54 per share. Once these shares have been repurchased they will be cancelled.
directorate and group secretary
The composition of the board and the details of the directors and the Group secretary in office at the date of this report are reflected here.
new appointments, resignations and re-election of directors retiring by rotation
Mair Barnes resigned from the board as a director on 20 February 2008.
Richard Inskip resigned from the board with effect from 31 May 2008. He will continue to serve on the board of Woolworths Financial Services (Proprietary) Limited as a director.
Judy Dlamini resigned from the board with effect from 31 July 2008.
In accordance with the articles of association of the company, at least one-third of the board is required to retire by rotation at each annual general meeting. Retiring directors are those who have been appointed between annual general meetings and those who have been in office the longest since their re-election. No director can serve more than three years without being re-elected.
In terms of the articles of association of the company, Buddy Hawton, Simon Susman, Nigel Colne and Sindi Zilwa are due to retire by rotation at the next annual general meeting and, being eligible, offer themselves for re-election.
Abridged curricula vitae of the directors seeking re-election are contained in the notice of the annual general meeting.
Directors seeking re-election do not have service contracts with the company with notice periods in excess of one year.
directors’ interests in shares
As at the date of this report, the directors held directly and indirectly, the following shares in the company’s ordinary issued share capital:
| 2008 Beneficial | 2007 Beneficial | ||||
| Direct | Indirect | Direct | Indirect | ||
| Non-executive directors | |||||
| Buddy Hawton | 12 500 | – | 12 500 | – | |
| Peter Bacon | 25 000 | – | – | – | |
| Nigel Colne | 80 000 | – | – | – | |
| Brian Frost | – | 260 000 | – | 260 000 | |
| Mike Leeming | – | 20 000 | – | 20 000 | |
| Chris Nissen | – | – | – | – | |
| Sindi Zilwa | – | – | – | – | |
| Executive directors | |||||
| Simon Susman | 62 256 | 12 594 395 | 15 | 12 594 395 | |
| Andrew Jennings | 40 916 | – | – | – | |
| Zyda Rylands | 26 285 | 1 364 842 | – | 1 310 171 | |
| Norman Thomson | 27 779 | 3 734 119 | 2 620 | 3 734 119 | |
On 16 July 2007, Zyda Rylands was granted initial vested rights in 1 250 000 convertible, redeemable, non-cumulative participating preference shares (ESOS shares), in terms of the Woolworths employee share ownership scheme.
Associates of directors do not hold any shares.
During the course of the year, no director had a material interest in any contract of significance with the company or any of its subsidiaries that could have given rise to a conflict of interest.
Transactions defined as related party transactions in terms of International Financial Reporting Standards between the company or its subsidiaries and the directors or their associates are disclosed here.
The emoluments of directors of the company are set out on the remuneration report.
woolworths holdings share trust ("the trust")
During the course of the year, Woolworths Holdings Limited continued to operate its share option and share purchase scheme.
In terms of the Trust Deed, the number of shares which can be utilised for the share incentive schemes is limited to 15% of the issued share capital of the company. Subsequent to the year end, on 18 August 2008 shareholders approved a resolution to amend the Trust Deed to adjust the limit of the share scheme, currently 15% of the issued share capital and the individual limit of 1.5%, to take into account the repurchase and cancellation of the treasury shares and all future repurchases and cancellations.
In terms of the share option and share purchase scheme, participation was open to employees at the discretion of the directors and in accordance with established guidelines. In terms of the schemes, the offer shares and options are releasable to beneficiaries on the basis of 20% becoming available on the first anniversary of the date of the offer and 20% each year thereafter. Shares have been granted to participants at the weighted average value per share determined over five trading days immediately preceding the offer date. Shares are not granted in closed periods.
share options
In terms of the Trust Deed, under the existing share option scheme, employees have been granted a total of 22 926 841
(2007: 28 770 004) share options ranging from R2.60 to R24.13, which are exercisable between July 2007 and June 2017.
share purchases
Shares held by the Trust on behalf of beneficiaries totalled 23 168 825 (2007: 32 979 168).
The number of shares and options available for utilisation by the Trust as at 30 June 2008 was as follows:
| 2008 | 2007 | ||
| Number of shares and options available for utilisation | |||
| Balance at the beginning of the year | 47 849 899 | 52 313 134 | |
| Shares and options acquired from employees | 4 405 700 | 6 739 959 | |
| Offers made to employees during the year | (9 958 065) | (13 018 250) | |
| Decrease in share capital due to the share repurchase | (2 680 882) | (190 208) | |
| Increase in issued share capital | 611 134 | 2 005 264 | |
| Balance at the end of the year | 40 227 786 | 47 849 899 |
The following three new long-term incentive share schemes came into effect on 1 July 2007:
- The Woolworths Share Appreciation Rights Scheme;
- The Woolworths Long-term Incentive Plan; and
- The Woolworths Deferred Bonus Plan.
share appreciation rights scheme
In terms of the Trust Deed, under the share appreciation rights scheme, selected employees were granted a total of 8 356 772
share appreciation rights at a grant price of R11.95.
long term incentive plan
In terms of the Trust Deed, under the long term incentive plan, 1 428 881 conditional awards were made to selected employees at a grant price of R11.95.
deferred bonus plan
In terms of the Trust Deed, 172 412 shares were purchased by executive directors under the deferred bonus plan.
woolworths employee share ownership trust
During the year 88 267 306 convertible, redeemable, non-cumulative participating preference shares (ESOS shares) were issued in terms of the Woolworths employee share ownership scheme at R20.75 per share.
A Woolworths employee share ownership trust was formed on 9 May 2007 and currently there are five trustees, namely:
Dolly Mokgatle (Chairperson)
Cherrie Lowe
Cecilia Maphalla
Zukile Nomafu
Wahida Parker
16 674 employees were granted rights to ESOS shares which will be converted into shares based on a predetermined formula at the end of eight years. Dividends were paid to beneficiaries of the scheme in accordance with the Trust Deed which is a predetermined formula of dividends paid to ordinary shareholders.
distribution to shareholders
On 20 February 2008 an interim dividend of 29.5 cents per ordinary share and 3.2 cents per convertible, redeemable, non-cumulative participating preference share (ESOS share) was declared and paid to shareholders and beneficiaries of the Woolworths employee share ownership scheme on 17 March 2008.
A final dividend of 49.5 cents per ordinary share (2007: 46.5 cents) and 7.9 cents per preference share (2007: 5.1 cents) in respect of the year ended 30 June 2008 was declared on 20 August 2008 and is payable on 15 September 2008.
directors’ responsibility for annual financial statements
The directors are responsible for preparing the annual financial statements and other information presented in the annual report in a manner that fairly presents the financial position and the results of the operations of the company and the group for the year ended 30 June 2008.
The external auditors are responsible for carrying out an independent examination of the annual financial statements in accordance with International Standards on Auditing in the manner required by the South African Companies Act, (no. 61 of 1973), as amended and for reporting their findings thereon. The auditors’ report is set out here.
The annual financial statements set out here have been prepared in accordance with International Financial Reporting Standards and are based on appropriate accounting policies which have been consistently applied in all material respects, and are supported by reasonable and prudent estimates where appropriate. Adequate accounting records have been maintained throughout the period under review.
going concern
The directors have reviewed the group’s budget and cash flow forecast for the year to 30 June 2009 and details of the group insurance arrangements. On the basis of this review and in the light of the current financial position and existing borrowing facilities, the directors are satisfied that the group is a going concern and have continued to adopt the going concern basis in preparing the financial statements.
borrowing powers
In terms of the articles of association, the borrowing powers of the company are unlimited. However, all borrowings by the group are subject to board approval as required by the board delegation of authority. The details of borrowings appear in
note 23 on the annual financial statements.
subsidiary companies
An annexure containing full particulars of the subsidiary companies appears here.
events subsequent to balance sheet date
Woolworths (Proprietary) Limited has entered into an agreement with Absa Group Limited (“Absa”) in terms of which Absa shall acquire 50% plus one share of Woolworths Financial Services (Proprietary) Limited subject to the fulfilment of conditions precedent. One of the conditions precedent has been fulfilled, being the approval by the Competition Tribunal.
Further conditions precedent include the restructuring of the Woolworths financial services business such that all assets of such business are beneficially owned by Woolworths Financial Services (Proprietary) Limited. This restructuring will take place pursuant to the terms of a restructure agreement which requires the approval of the South African Reserve Bank. The agreement will ensure that the loans, in-store card (securitised and unsecuritised),Visa card, associated insurance, short-term insurance and collections businesses are beneficially owned by the Woolworths Financial Services Group.
special resolutions
The following special resolutions were passed during the course of the year
Woolworths Holdings Limited
| Effective date | |
| (date of registration by CIPRO) | Summary of resolution |
| 28 November 2007 | Approved the general authority authorising the company to acquire ordinary shares issued by the company. |
| 28 November 2007 | Approved amendments to the articles of association to update the clauses related to shareholder voting and the payment of dividends. |
The special resolution approved by shareholders on 18 August 2008 relating to the repurchase of the treasury shares was registered subsequent to the date of this report.
Subsidiary companies
| Effective date | Name of subsidiary and |
| (date of registration by CIPRO) | summary of resolution |
| 7 July 2007 | Woolworths (Proprietary) Limited |
| To delete the special condition in the memorandum of association relating to the | |
| restrictions of the company as an agent to specified parties and to ratify the actions of | |
| the company and directors prior to the deletion of the special condition. | |
| 4 February 2008 | iSentials (Proprietary) Limited |
| To amend the main business and object clause of the memorandum of association to | |
| align this to the activities of the company. | |
| 5 March 2008 | Woolworths International SA (Proprietary) Limited |
| To amend the articles of association of the company pertaining to the minimum number | |
| of directors. | |
| 4 April 2008 | Woolworths Pharmaceuticals (Proprietary) Limited |
| To amend the articles of association of the company pertaining to the minimum number | |
| of directors. |