commentary
Group results
The results for the period are impacted by the disposal of a controlling interest of Woolworths Financial Services on 1 October 2008 and that the trading period is 52 weeks whilst last year included 53 weeks.
Group turnover grew by 7.2% on a comparable 52 weeks; 5,5%(52:53).
Gross margin increased from 31.2% to 31.5%. The higher contribution of food sales at a lower margin has been off-set by an improved Woolworths clothing and general merchandise margin as a result of focused sourcing and good stock management.
Profit before tax and exceptional items decreased by 4.8% impacted by an unrealised foreign exchange loss, the extra trading week in June 2008 and the non-comparable Woolworths Financial Services business. This is included in full in the first quarter and is equity-accounted as a joint venture in the remaining nine months.
Headline earnings per share ("HEPS") decreased 4.9% for the period. After adjusting for the R75m STC charge on the special dividend and the after tax unrealised foreign exchange loss of R57m, adjusted headline earnings per share ("HEPS") increased by 7.6% on the previous year to 126.0 cents. On a comparable 52 weeks last year, adjusted HEPS increased by 13.9%.
Return on equity based on adjusted headline earnings, increased from 28.0% to 30.3%.
Following the Woolworths Financial Services transaction, the company has returned cash to shareholders in the form of a special dividend of R750m and open market share repurchases of R316.6m. We remain with a strong balance sheet and consequently further share repurchases will be considered.
Our policy on distributions is to maintain a cover of 1.5 times earnings.
A final ordinary distribution of 53.5 cents per share has been declared. The total distribution per ordinary share for the year amounts to 179.0 cents, which includes the special dividend.
operating review
Woolworths retail (comparable on a 52:52 week basis)
Overall sales grew by 5.7%. Conditions were tough for most of the year, but consumers have seen some relief in the second half with reductions in interest rates. Our sales growth showed improvement in the fourth quarter.
Clothing and general merchandise sales increased by 0.4%, with our customers favouring our value lines. Average price movement for the year was 2.5%, despite a softer exchange rate in the second half.
Food sales increased by 9.3%. Our repositioned prices and ongoing promotional strategies have improved customers price perception of our food business. Price movement of 8.2% was lower than inflation for the period.
Costs were well controlled despite a space growth of 6.4%.
Profit before tax excluding the unrealised foreign exchange loss increased by 4.7%.
The space growth slowed down compared to previous years, with an increase on last year of 3.5% in clothing and general merchandise space and 11.0% in food space. We opened 7 full-line stores and 15 food stand-alone stores in the year.
Woolworths financial services
Customers are purchasing less on credit but are extending their credit terms and benefitting by the lowering of interest rates.
The closing debtors books at 30 June 2009 were 6.4% up on the prior year. Bad debts were controlled, with an impairment charge as a percentage of average gross receivables of 7.5% (June 2008: 9.5%).
Country Road
Country Road showed good growth in a tough Australian market with a sales increase of 18.4% and a profit before tax growth of 49.8% in Australian dollars.
Having successfully repositioned our value proposition for the middle and upper income consumer, we are now appealing to a broader customer base that has become more discerning in a slowing economy.
Country Road has recently been awarded the Australian Retailers Association award for overall retailer of the year.
Outlook
We are conscious that the economic conditions will remain tough throughout the year.
We believe that we have a better positioned merchandise offer, without any compromise to our quality. We will remain focused on managing costs and controlling our stock throughout this period. The improvement in sales experienced in the fourth quarter has continued into the first eight weeks of this year.
Leadership and board appointments
The directors are pleased to announce that:
Simon Susman will retire as Chief executive officer of Woolworths in November 2010 having reached retirement age. To retain his extensive international and local retail knowledge he will assume a newly created position of non-executive deputy Chairman effective from November 2010.
Ian Moir, the Chief executive officer of Country Road, who has led the significant turnaround at Country Road will be appointed Managing director retail and Chief executive officer-elect of Woolworths effective 1 January 2010. He will succeed Simon in November 2010. An appointment of Chief executive officer in Country Road will be made due course.
These appointments will provide the Group with continuity into the future.
In the event that the deputy Chairman is appointed Chairman in the future, a lead independent non-executive director will be appointed.
Andrew Jennings, Managing director retail, having concluded his three year management contract on 31 December 2009, has advised us of his desire to return to the global retail stage to pursue new opportunities. Since joining us Andrew has been a tireless agent of change, a champion of our brand and has contributed significantly to the Group through the achievement of higher standards of performance and setting a strong foundation for the future.
The directors are further pleased to announce the following:
Lindiwe Mthimunye-Bakoro and Namhla Thina Siwendu have been appointed non-executive directors of Woolworths Holdings Limited with immediate effect.
Lindiwe Mthimunye-Bakoro is a Chartered Accountant with primary experience in investment banking.
Thina Siwendu holds a B Soc. Sc (Hons) and LLB degree. She heads her own legal firm and specialises in corporate governance and corporate law.
These appointments will bring additional skills to the board and its committees and add to the spread of age, gender and diversity.
Trading statement
The directors would like to highlight that the profit of R380m earned on the disposal of a 50% plus one share of Woolworths Financial Services to ABSA Group Limited on 1 October 2008 will continue to impact the results of the six months ended December 2009.
Consequently, earnings per share ("EPS") will be more than 20% lower than the results for the corresponding period of the previous year. It is however not yet possible to quantify the impact on EPS within the 20% range required by the JSE Limited Listings Requirements ("JSE Listings Requirements") with a reasonable degree of certainty nor to provide guidance on headline earnings per share ("HEPS").
A further trading statement will be issued later in the reporting period and provide earnings forecast ranges for EPS and HEPS as required by the JSE Listings Requirements.
| DA Hawton | SN Susman |
| Chairman | Chief executive officer |
Cape Town, 26 August 2009
notice of distribution
Notice is hereby given that the directors have resolved to make a cash distribution of 53.5 cents per ordinary share in lieu of the final dividend for the year ended 30 June 2009 out of the Company's share premium account, if shareholders in general meeting pass the requisite resolutions authorising the directors to allot and issue ordinary shares, for cash, to the Company's wholly-owned subsidiary, Woolworths (Proprietary) Limited.
If, however, such authority is not obtained from the shareholders a final dividend of 53.5 cents per ordinary share for the year ended 30 June 2009 will be paid.
The salient dates for the distribution or dividend will be as follows:
| Last day to trade to receive the distribution or dividend | Thursday, 17 September 2009 |
| Shares trade "ex" the distribution or dividend from | Friday, 18 September 2009 |
| Record date for the distribution or dividend | Friday, 25 September 2009 |
| Payment date | Monday, 28 September 2009 |
Share certificates may not be dematerialised or rematerialised between Friday, 18 September 2009 and Friday, 25 September 2009 (both days inclusive).
In accordance with the Company's articles of association a distribution or dividend 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 will be donated to a charity nominated by the directors.
A circular, incorporating a notice convening a general meeting of shareholders, which contains details of the proposal to allot and issue shares to the Company's subsidiary, Woolworths (Proprietary) Limited has been despatched to shareholders. Shareholders are further referred to the separate cash distribution announcement published on SENS and in the press which contains full details of the cash distribution, including the financial effects thereof.
A final cash dividend of 12.3 cents per preference share for the six months ended 30 June 2009 will be paid to the beneficiaries of the Woolworths Employee Share Ownership Scheme on 28 September 2009.
| CL Lowe | |
| Group secretary | Cape Town, 26 August 2009 |
directorate and statutory information
Non-executive directors:
Buddy Hawton (Chairman), Peter Bacon (British), Nigel Colne (British),
Brian Frost, Mike Leeming, Chris Nissen, Sindi Zilwa
Executive directors:
Simon Susman (CEO), Andrew Jennings (British), Zyda Rylands, Norman Thomson
Group secretary: Cherrie Lowe
Share code: WHL ISIN: ZAE000063863
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 Inc and SAB & T Inc
Bankers: The Standard Bank of South Africa Limited
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Transfer secretaries:
Computer share Investor Services (Pty) Limited
70 Marshall Street, Johannesburg 2001
visit our investor relations site: www.woolworthsholdings.co.za