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group results
The directors are pleased to report a significant increase of 34.5%
in headline earnings from continuing operations and 40.3% in headline
earnings per share from continuing operations for the financial
year ended 30 June 2003. Operating profit was up 29.6% to
R888,0m off an increased total revenue of R10,1bn. This result
continues our consistent growth trend over the past 3 years.
  
trading results
WOOLWORTHS
The strong consumer demand experienced in late 2002 was countered
by a softening in 2003 caused by continuing high prices together
with high interest rates and the late arrival of winter.
Against this background Woolworths sales increased by 15.4% in the
52-week period compared to a 53-week period last year. The
impact on sales of the additional week in the previous year was
approximately 1.9%. Improved market share in clothing and
in foods were key factors in the sales achievement. High inflation
relative to the prior year also contributed to increased turnover.
The store expansion programme delivered an additional 33 stores
in South Africa and internationally. Locally, the bulk of
our new food stores opened in the last quarter and are expected
to contribute more significantly to next year’s sales growth.
Operating profit increased by 31.3% and was assisted by the high
interest rates on the debtors books, tight cost control and the
close attention to primary buying margins. The overall gross
profit margin was slightly lower than last year reflecting the increase
in foods and franchise sales contribution.
The Clothing and Home division grew sales by 11.6% against the 53
weeks last year and 10.2% within comparable South African stores.
Womanswear, menswear and footwear continued to perform well and
grew market share while childrenswear and homeware performed below
expectations. Childrenswear will focus on better segmentation
of age groups and increased fashionability. Improvements have
been made to the buying division structure of homeware and a new
innovative range will be launched. A store refurbishment programme
aimed at modernising the presentation of our offer will commence
over the next year.
Overall the market is responding well to our merchandise strategy
of consistently offering our customers beautiful products of exceptional
quality and value in a modern exciting shopping experience.
We expect this to continue.
The Food division exceeded our expectations and sales increased
by 20.6% against the 53 weeks last year and 14.7% within comparable
South African stores. The growth in this period was bolstered
by the opening of new smaller stores. Sales slowed somewhat
as inflation figures came off their December highs, further exacerbated
by the plastic bag charging which was introduced in May this year.
Customers are responding positively to our strategy to provide safe,
nutritious and delicious food conveniently at good value across
a comprehensive range and are increasingly choosing Woolworths to
do their main shop. An uplift in product volumes in categories
where inflation is lowest and the opening of approximately 20 stores,
should provide this division with real growth in the years ahead.
Woolworths Financial Services achieved substantial growth in retail,
credit card and personal loan books of 23.9%. Performance
was bolstered by high interest rates experienced throughout the
year. Bad debts were well managed and the net bad debt experience
for the period improved. A clearer understanding of our mainly
female customers, together with the introduction of a loyalty programme
linked to our Visa card, rewarding customers with Woolworths Points,
is expected to show positive results in the future.
Franchise stores achieved retail sales in excess of R1bn for the
first time during the period through 110 stores; 53 located in South
Africa, 47 elsewhere in Africa and 10 in the Gulf. African
stores traded above expectations while the Gulf region was depressed
due to the tensions of war. The international business has
been affected by the strong rand which remains a concern.
A greater focus on delivering product which meets the customers’
needs in each market through the introduction of a revised supply
chain process should provide a solid foundation for the future growth
of the franchise division.
COUNTRY ROAD (from continuing operations)
Despite positive economic conditions in Australia, the clothing
retail environment was tough. The decrease in consumer spend
was exacerbated by strong competition which saw the major department
stores discounting heavily.
Sales during the period in Australian dollar terms remained at similar
levels to the previous year. The profit for this period of
A$2.4m (2002 : A$1.1m) was achieved against a background of significant
change in the business and further sustainable cost reductions.
The transformation of the supply chain processes and systems was
completed and is now contributing to improved availability.
An important step has been taken with the decision to adopt a more
retail-focused business model by reducing the wholesale-based component
which should lead to a less complex and more efficient business.
financial
Over the last 3 years we have concentrated on improving our use
of shareholder funds. ROE has grown steadily from 11.3% in
June 2000 to 23.7% in the current year. The effect of our
share buy-back programme has increased our HEPS by 5.8% in the current
period.
buy-back of shares
During the year E-Com Investments 16 (Pty) Limited, a subsidiary
of the company, repurchased 49 277 007 shares of the
company’s issued share capital at a cost of R235.1 million
bringing the total buy-back to date to 82 415 720 (8.8%)
shares at a cost of R369.8 million.
cash distribution
Notice is hereby given that the board of directors has proposed
a cash distribution of 18.5 cents per share, in lieu of an ordinary
final dividend, by way of a reduction of the share premium account,
for the year ended 30 June 2003, subject to approval
by shareholders. A circular, incorporating the details of
the capital reduction and the cash distribution and notice of a
general meeting of shareholders, will be posted to shareholders
on 28 August 2003.
prospects
In the last three months of this reporting year trading conditions
were tough and we expect this to continue through the first half
of the new financial year.
However we believe that in South Africa the ongoing impact of reducing
interest rates should, together with real easing of inflation, lead
to an increase in our customers’ disposable income and confidence
by the second half of the financial year.
This, together with our organic growth strategies, leads the Board
to be confident about continuing to deliver further growth for the
year ahead.
On behalf of the Board of Directors.
DA Hawton
Chairman
Cape Town
21 August 2003 |
SN Susman
Chief executive officer |
Directorate
Non-executive directors DA Hawton (Chairman),
M Barnes (British), NL Colne (British), BJ Frost,
SV Zilwa
Executive directors SN Susman (CEO), MR
Canning, GP de Kock, RJD Inskip, NW Thomson
Company Secretary CL Lowe
Woolworths Holdings Limited Company registration number
1929/001986/06
Share code WHL ISIN ZAE000028288
Auditors Ernst & Young
Sponsor HSBC Investment Services (Africa) (Pty) Ltd
Registered Office Woolworths House, 93 Longmarket Street,
Cape Town 8001
Transfer Secretaries Computershare Limited, 70 Marshall
Street, Johannesburg 2001
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