commentary

group results

The board wishes to announce another set of solid results. The headline earnings per share for the twenty-six weeks to December 2005 increased 19.6% (23.9% prior to the non-comparable STC payment) from 44.4 cents to 53.1 cents per share. The return on equity grew to 37.2% from 27.6%. A dividend of 24.0 cents per share has been declared representing an increase of 29.7% over the same period last year. The uplift in the level of the dividend reflects the decision of the board to increase the proportion of the dividend payable at the interim period. For the full financial year we aim to maintain the dividend cover at around 1.7 times earnings.

trading environment

In South Africa the retail environment remained robust due to stable interest rates, low inflation, continued growth of the emerging black market and an increase in consumers' real disposable income. This trend is expected to continue.

financial review

Group revenue has increased by 16.7% to R7.4bn.

Operating profit for the group increased by 19.6% to R730.3m with an improvement in operating margin from 9.6% to 9.8%. This has been achieved despite our investment in initiatives which are designed to enhance future growth including the World of Difference loyalty programme, an accelerated store development plan and a customer service improvement project.

The group's gross profit percentage decreased from 32.9% to 32.7% as a result of the change in mix of our different businesses.

The share repurchase in March 2005 has resulted in an increase in borrowings over the same period last year and a substantial increase in finance costs. The positive effect of the capital restructuring is reflected in the increase in headline earnings per share and an enhanced return on equity.

Headline earnings per share has been impacted by 1.9 cents per share due to an increase in the effective tax rate as a result of STC payable on the dividend paid in September 2005. The comparative effective tax rate for the year will be further impacted by the STC payable on the dividend in March 2006.

woolworths operating review

RETAIL

Clothing and home grew sales by 12.6% in total and 8.2% in comparable stores, with an average deflation rate of approximately 2.3%. There was good growth in womenswear, attributable to the successful implementation of our new design-led process, which ensures that our offering meets the taste requirements of both our modern and classic customers. This process is currently being rolled out to other departments. Childrenswear also experienced good growth by providing improved value and a better range structuring.

Food continued to perform exceptionally well and sales grew by 20.9% in total and 12.2% in comparable stores, with an average inflation rate of approximately 3.7%. Our strong growth is driven by our convenient locations and our continual focus on offering our customers differentiated products.

In corporate stores we expanded our trading space by 4.2% in clothing and home and 6.5% in food over the period.

FINANCIAL SERVICES

Our in-store card, credit card and personal loan books grew by 19.3% for the twelve months to December 2005. The net bad debt experience on the combined books increased to 2.8% of advances due to a planned extension of our credit limits. Overall operating profit increased from R161.1m to R187.3m. Net profit before tax decreased from R101.0m to R75.8m due to the increase in finance costs, arising from the restructure of the balance sheet.

country road operating review

Retail sales were 6.7% higher in Australian dollar terms than the same period last year, with comparable store growth of 5.9%. There was a strong increase in unit sales growth which was achieved by an ongoing focus on improving value, to make the business more accessible to a broader range of customers. Overall total sales increased 1.0% from the same period last year. We are pleased to note that retail represents a higher proportion of sales in line with our strategy.

Net profit before tax increased from A$1.4m to A$2.3m.

group prospects

Given the current trading environment we expect to deliver another year of solid growth in headline earnings per share, after adjusting for the non-comparable STC payments.

empowerment plans

Woolworths is committed to black economic empowerment (BEE) and is currently evaluating its empowerment initiatives in terms of the recently published codes. Woolworths supports the broad-based ownership approach favoured by the Department of Trade and Industry and as such is developing plans around BEE ownership, which will be presented to shareholders for approval at the forthcoming annual general meeting.

change to the board of directors

On 25 November 2005 Nolitha Fakude resigned from the board due to her executive director commitments. We would like to thank her for the meaningful contribution she made to the group.

dividend payment

Notice is hereby given that the directors declared an interim dividend of 24.0 cents per share for the six months ended December 2005.

Share certificates may not be dematerialised or rematerialised between Monday, 6 March 2006 and Friday, 10 March 2006, both days inclusive.

CL Lowe
Group secretary
Cape Town 16 February 2006

directorate and statutory information

Non-executive directors: Buddy Hawton (Chairman), Mair Barnes (British), Nigel Colne (British), Brian Frost, Mike Leeming, Chris Nissen, Sindi Zilwa

Executive directors: Simon Susman (CEO), Richard Inskip, 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 and SAB & T Inc    Bankers: Standard Bank of South Africa Limited

Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)

Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street, Johannesburg 2001

Visit our investor relations site: www.woolworthsholdings.co.za