Group results

The board is pleased to report another year of growth with a 21.3% increase in headline earnings per share for the financial year to June 2004, increasing from 64.8 cents per share to 78.6 cents per share. Group ROE has improved from 23.7% to 25.7%. In lieu of a dividend, a distribution from share premium of 25.5 cents per share is declared, taking total distributions for the year to 38.5 cents per share, up 32.8% from last year.

Trading environment

The South African retail environment was characterised by buoyant consumer demand. South Africans are feeling good about their country. Interest rates and personal debt levels are at their lowest for many years. Ten years into our democracy the growing number of economically active consumers has broadened, assisted by employment equity and empowerment and are benefiting all sectors of the retail industry.

The strong rand created difficult trading conditions for international franchise operations.

In Australia, consumer spending continued to grow supported by improved tax benefits, which offset a levelling in house prices.

Financial review

Group turnover increased by 12.1% to R10.6bn.

In the Woolworths operating group, Clothing and Home grew turnover by 12.0%. Imported merchandise, cheaper through the strengthening of the rand, made us less competitive. The Foods business grew by 19.2% which was well ahead of the market.

Country Road’s sales declined by 6.5% in Australian dollar terms, in part affected by reduced wholesale sales following the decision to focus on a single wholesale customer. In addition, sales in rand terms were negatively impacted by the strengthening of the rand against the Australian dollar.

The group’s gross profit percentage declined from 33.1% to 31.8% due to the larger contribution from the Foods business and local franchise operations both of which enhanced total operating profit.

Operating profit for the group increased by 19.6% to R1 062m as the business benefited from improved efficiencies and stringent cost control.

Operational review

WOOLWORTHS

Retail

Net profit before tax in the Woolworths operating group retail segment grew 30.1% to R715.6m.

Clothing and Home recorded sales growth of 12.0% (9.0% in comparable stores). The second half of the year saw an encouraging volume growth, attributable to improved customer confidence and better values.

Womenswear had an excellent year, gaining market share as the market responded well to our improved offer. Menswear and Childrenswear had a disappointing year and are currently being repositioned to follow the lessons learnt in womenswear.

Sales volumes in Home improved substantially in the second half as we introduced new ranges at more competitive prices and an improved store environment.

Foods performed exceptionally well with sales growing by 19.2% (7.8% in comparable stores). Despite the drop in food inflation in the second half of the year, sales in this period exceeded the 17.7% growth achieved in the first half of the year.

A further gain in market share from 7.0% to 7.4% confirms “the good food strategy” of consistently offering customers exceptional quality and convenience, resulting in more customers doing their main shop at Woolworths. Trading space continued to increase with the opening of more convenience stores.

Financial services

Substantial growth of 30.2% in our in-store card, credit card, and personal loan books was countered by an 8.0% reduction in the usury rate over the period, resulting in a decline in net profit before tax from R215.2m to R212.3m. Customers are increasing their use of their Woolworths cards whilst bad debt continues to be well managed, representing 1.7% of advances (2003: 2.0%).

COUNTRY ROAD

Country Road achieved a small profit before tax of A$2.5m. The repositioning of Country Road which commenced in July with a new brand presentation and better, more customer-focused ranges should start to show benefits.

Prospects

The retail environment continues to experience solid growth on the back of lower interest rates and inflation. Consumer spending is expected to remain strong well into the year.

In Woolworths the repositioning in Menswear and Childrenswear, growth in Ladieswear, Home and Foods and a drive to grow the Woolworths card book should result in further real sales growth in the next year. In addition focus on supply chain efficiencies and expense control will continue. The diversity of our portfolio is beginning to deliver a less cyclical element to our earnings.

As announced in our trading update on 13 July 2004, the group has embarked on a process to evaluate alternatives in order to optimise its financial services balance sheet structure. In the event of such a restructure the board will consider how it wishes to dispose of surplus funds which may result from this process.

The board expects to continue to deliver real growth to our shareholders in the year ahead.

Cape Town, 19 August 2004

Cash distribution

Notice is hereby given that the directors have declared a cash distribution of 25.5 cents per share, in lieu of an ordinary final dividend, for the year ended 30 June 2004.The payment will be made by way of a reduction in the share premium account and in terms of the general authority to make payments to shareholders, granted at the annual general meeting held in November 2003.

Shareholders are advised that the last day to trade in order to participate in the cash distribution will be on Friday, 3 September 2004.The shares will trade “ex” the distribution from commencement of business on Monday, 6 September 2004 and the record date will be Friday, 10 September 2004. The distribution will be payable on Monday, 13 September 2004.

Share certificates may not be dematerialised or rematerialised between Monday, 6 September 2004 and Friday, 10 September 2004, both days inclusive.

CL Lowe
Group company secretary
Cape Town, 19 August 2004

directorate and statutory information

Non-executive directors: Buddy Hawton (Chairman), Mair Barnes (British), Nigel Colne (British), Nolitha Fakude, Brian Frost, Mike Leeming, Chris Nissen, Sindi Zilwa
Executive directors: Simon Susman (CEO), Richard Inskip, Norman Thomson
Group company secretary: Cherrie Lowe Share code: WHL ISIN: ZAE000028288
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 and SAB & T Inc Bankers: Standard Bank of South Africa Limited
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street, Johannesburg 2001