COMMENTARY
GROUP RESULTS
The group performed well for the year with all retail segments growing above the market.
Adjusted headline earnings per share increased by 24.7% to 157.2 cents per share with group turnover increasing by 10.5% (second half up by 11.6%). Woolworths SA retail profit before tax was 22.9% up on the previous year.
The results are not comparable for the following reasons:
- R380m profit earned on the sale of a controlling interest in WFS included in 2009 year;
- R75m STC on special dividend paid in 2009 year; and
- R57m (after tax) foreign exchange loss included in 2009 that has unwound as a R57m profit in 2010.
Return on equity, based on headline earnings, increased from 26.3% to 39.4%.
The balance sheet remained strong and open market share repurchases of R410m were made during the year.
A final dividend of 67.0 cents per share has been declared. A total distribution of 105.0 cents per ordinary share has been made for the period.
The growing increase in customer confidence and the strategies that we put in place to attract customers back to our stores delivered a sales increase of 10.4% and market share gains in all categories.
Clothing and general merchandise sales increased by 11.2% for the year, with comparable stores increasing by 6.7%. Gains in market share have been made for the past 15 months, with clothing and footwear growth tracking approximately 5% above the RLC market on a continual basis.
Food sales increased by 9.9% for the year with comparable stores increasing by 5.6%. Price movement for the year averaged 5.2%. The second half delivered real volume growth in our comparable stores. The market has responded positively to our product value offering, with market share gains in the last nine months and growth exceeding the RLC market by approximately 6%.
Gross margin increased from 28.0% to 29.8%, achieved through better sourcing and lower markdowns. The clothing and general merchandise sourcing strategy delivered our year three targeted margin a year earlier than anticipated.
Operating margin has shown a strong improvement to 7.0% from 6.2%, mainly due to the gross margin improvement.
New store expansion was down on the previous year, with seven full-line stores and nine food stand-alone stores opened. Trading space increased by 4.8% in clothing and general merchandise and 3.7% in food.
The trading conditions in Australia have been challenging. The government’s fiscal stimulus packages of the previous year were not repeated and there have been six interest rate increases during the year.
Sales increased by 8.5% in the year, with a comparable sales increase of 1.5% (in Australian dollar).
Gross margin decreased from 59.5% to 57.4%, due to heavy discounting needed to stimulate customer spending.
Operating margin declined to 4.9% from 6.3%, impacted by the reduced gross margin and the start-up costs of the new Trenery brand.
The results of the WFS segment are not comparable with last year. They have been equity accounted for the full year ended June 2010, whilst they were accounted for as a subsidiary for three months and equity accounted for nine months in the year ended June 2009.
Customer demand for credit remained subdued throughout the year. The closing debtors’ books at year-end were 1.3% down on the previous year.
The quality of the debtors’ books have improved considerably with a reduction in the impairment charge as a percentage of average gross receivables from 7.5% to 5.1%.
OUTLOOK
We expect economic conditions in South Africa to improve, albeit at a slower pace. Trading in Australia will remain tough but is expected to improve in the second half.
Current trading remains positive and in line with expectations. The business is focused, strategies are delivering and we are well positioned for continued growth in the year ahead.
The benefit of a lower effective tax rate last year will return to normal levels.
| DA Hawton | SN Susman |
| Chairman | Chief executive officer |
Cape Town, 25 August 2010
DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a final cash dividend of 67.0 cents per ordinary share for the fifty-two weeks ended 27 June 2010.
The salient dates for the dividend will be as follows:
| Last day to trade to receive a dividend | Friday, 10 September 2010 |
| Shares commence trading “ex” dividend | Monday, 13 September 2010 |
| Record date | Friday, 17 September 2010 |
| Payment date | Monday, 20 September 2010 |
Share certificates may not be dematerialised or rematerialised between Monday, 13 September 2010 and Friday, 17 September 2010 both days inclusive.
In accordance with the company’s articles of association, dividends 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 be donated to a charity nominated by the directors.
A final cash dividend of 22.1 cents per preference share for the fifty-two weeks ended 27 June 2010 will be paid to the beneficiaries of Woolworths Employee Share Ownership Scheme on 20 September 2010.
CL Lowe
Group secretary
Cape Town, 25 August 2010
DIRECTORATE AND STATUTORY INFORMATION
Non-executive directors:
Buddy Hawton (Chairman), Peter Bacon (British), Lindiwe Bakoro, Nigel Colne (British), Brian Frost, Mike Leeming, Chris Nissen, Thina Siwendu, Sindi Zilwa
Executive directors:
Simon Susman (CEO), Ian Moir (Australian), Zyda Rylands, Norman Thomson
Group secretary:
Cherrie Lowe
Share code:
WHL
ISIN:
ZAE000063863
Registration address:
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
JSE sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg 2001
Visit our investor relations site: www.woolworthsholdings.co.za
