commentary

WHL GROUP

The strong sales growth experienced in the first half of the year continued through into the second half despite the pressure on the SA consumer. The inclusion in the second quarter of the group’s Australian acquisition, Witchery, further boosted sales for the 53 weeks to 30 June 2013, which increased 23.2% over the 52 week period in 2012.

Sales growth was leveraged by improved gross margins in both the South African and Australian clothing businesses, benefiting from improved sourcing, delivering group profit before tax growth of 27.1%.

Included in earnings and headline earnings are transaction and integration costs of R77 million (June 2012: R27 million) relating to the acquisition of the Witchery Group, once-off store employee restructuring costs of R43 million and net unrealised foreign exchange gains of R67 million (June 2012: R43 million), all stated before tax. Earnings per share (“EPS”) and headline earnings per share (“HEPS”) for the 53-week period to 30 June 2013 were 25.5% and 27.3% higher than the corresponding 52-week reporting period. HEPS is 2.7% higher when adjusted for these non-core items. Return on equity (excluding goodwill) increased from 50.3% at 24 June 2012 to 58.7% at 30 June 2013.

The impact of the additional 53rd week has added 2% to earnings.

Return on equity increased from 46.4% at 24 June 2012 to 49.7% at 30 June 2013.

WOOLWORTHS

Clothing and General Merchandise

Woolworths Clothing and General Merchandise sales grew by 12.3% and by 10.1% on a 52-week basis.

Clothing sales grew by 13.7% with price movement of 7.1% (comparable store sales increased by 9.3%) with market share unchanged from last year at 15.4%. General merchandise grew by 9.2% (52-weeks: 7.2%) and by 4.9% (52-weeks: 3.0%) in comparable stores. Gross profit margins improved from 44.5% to 46.4% as we continued to generate benefits from improved sourcing. Total expenses (excluding store employee restructuring costs and unrealised foreign exchange gains) increased 17.9% with comparable store cost growth of 7.9% (5.8% on a 52-week basis). Adjusted profit before tax grew by 15.2% and return on sales increased to 17.2% from 16.8% last year.

9,943m² (2.6%) of net new store footage was added during the year.

Food

Our supermarket strategy, which is aimed at capturing a greater share of our loyal customers’ food shop, continued to show success, whilst our core produce and protein departments also performed well.

Food sales grew by 15.4% (52-weeks: 13.3%), well ahead of market growth of 7.1%, with price movement of 7.6%. Sales in comparable stores grew by 12.1% and 10.0% on a 52-week basis. Food sales grew by an annualised 15.3% in the 26 weeks of the second half compared to first half growth of 11.1%. Gross profit margins improved from 25.2% to 25.6%. Expenses (excluding the impact of store employee restructuring costs) increased 15.7% with comparable store costs increasing by 7.5% (5.4% on a 52-week basis). Adjusted profit before tax grew by 19.9% (17.9% on a 52-week basis) and return on sales increased to 6.0% from 5.8% last year.

7,775m² (4.7%) of net new store footage was added during the year.

COUNTRY ROAD

The Country Road business performed extremely well and with the acquisition of the Witchery Group sales increased 68.5% in Australian dollar terms (90.8% in rand). Comparable sales in Australasia increased by 12.0%.

Gross margin increased to 61.9% (from 59.7%). Operating costs were well controlled, resulting in an increase in profit before tax from A$22 million to A$64 million before once-off transaction costs. On translation the Country Road Group increased their contribution to adjusted group profit before tax from R185 million to R588 million and now contributes 16% to group profit. Return on sales (excluding transaction costs) increased from 5.3% to 9.5%. Return on equity increased from 18.5% to 30.2%.

Total net retail space including the Witchery Group acquisition increased during the year by 85%. Net space excluding the Witchery Group acquisition increased by 9%.

The Country Road Group did not have a 53rd week.

WOOLWORTHS FINANCIAL SERVICES

The overall debtors’ book reflected year-on-year growth of 15.8%, with an impairment rate unchanged from June 2012 at 1.9%. Net interest income increased by 12.0% on the prior year, impacted by lower interest rates. Costs excluding impairments were well controlled, up 7.8% on 2012. Profit before tax increased by 29.9% from the previous year and return on equity increased from 23.1% to 27.6%.

OUTLOOK

We believe that economic conditions in South Africa will remain constrained, especially in the lower and middle income segments of the market where consumer debt levels remain under pressure.

In Australia, we expect the market to remain highly competitive as consumer and business confidence remains subdued.

Trading for the first eight weeks of the new financial year has been in line with expectations both in South Africa and Australia.

Any reference to future financial performance included in this statement has not been reviewed and reported on by the company’s external auditors and does not constitute an earnings forecast.

Changes to the Board of Directors

Sindi Zilwa retired from the board at the conclusion of the Annual General Meeting held on 14 November 2012. Sindi spent eleven years on the Woolworths board. She made a significant impact, particularly as a member of the audit committee and on our transformation journey. We wish her well for the future.

S N Susman
Chairman

Cape Town, 28 August 2013

I Moir
Group chief executive officer

 

Dividend Declaration

Notice is hereby given that the directors have declared a gross cash dividend of 148.0 cents (125.80 cents net of dividend withholding tax) per ordinary share for the 53 weeks ended 30 June 2013. The dividend has been declared from income reserves and a dividend withholding tax of 15% will be applicable to all shareholders who are not exempt. The company has no STC credits to be utilised to offset against the 15% dividend withholding tax.

The issued share capital at the declaration date is 842 643 525 ordinary shares and 89 164 010 preference shares.

The salient dates for the dividend will be as follows:

Last day of trade receive a dividend  Friday, 13 September 2013 
Shares commence trading “ex” dividend  Monday, 16 September 2013 
Record date   Friday, 20 September 2013 
Payment date   Monday, 23 September 2013 

Share certificates may not be dematerialised or rematerialised between Monday, 16 September 2013 and Friday, 20 September 2013 both days inclusive.

A gross cash dividend of 148.0 cents (125.80 cents net of dividend withholding tax) per preference share for the 53 weeks ended 30 June 2013 will be paid to the beneficiaries of the Woolworths Employee Share Ownership Scheme on Monday, 23 September 2013.

Thobeka Sishuba-Mashego

Group secretary,
Cape Town, 28 August 2013