Group results
Group turnover grew by 16.1% to R9.8bn for the twenty six weeks ended December 2007, with lower growth in the second quarter reflecting the slowdown in South African consumer spending.
Gross margin increased from 34.3% to 34.8%.
Operating profit (excluding the non-comparable BEE charge) grew by 5.6% to R1.0bn, impacted by a 28.0% increase in expenses primarily due to planned expenses in South African retail, higher bad debt and non-comparable concession costs in Country Road.
Interest paid increased by 40.9% due to higher borrowings to fund the growth in the financial services books and increasing interest rates.
This resulted in profit before tax and exceptional items, excluding the non-comparable BEE expense of R25.5m, decreasing by 2.1% to R769m.
The effective tax rate increased due to a higher relative STC charge and tax on Country Road’s profits, previously shielded by tax losses.
Diluted headline earnings per share decreased by 12.3% from 63.4 cents per share to 55.6 cents per share.
The interim dividend has been maintained at 29.5 cents per share.
operating review
Woolworths
Trading environment
Continued increases in interest rates, the implementation of the National Credit Act and rising inflation, especially in food and fuel, have led to an ongoing slowdown in South African consumer spending. The growth in retail sales declined steeply in the second quarter of the year.
Retail
Clothing and general merchandise grew sales by 7.3% in total and 4.7% in comparable stores, with an average inflation rate of approximately 9.6% over the period. Good performances in childrenswear, footwear and accessories, the womenswear Re and WCollection ranges, and branded beauty were offset by disappointing sales in core womenswear ranges and lingerie.
Food continued to perform well, although below expectations. Sales grew by 18.8% in total and by 9.7% in comparable stores. Inflation averaged approximately 12.1% over the period. Food continued with innovation in new and upgraded products, enhanced value through competitive pricing of key value items and promotions, and improved availability, especially over the Christmas period.
The financial year has 53 trading weeks and as such the key trading day of 24 December is not included in the sales figures above.
Trading space
Trading space was expanded in clothing and general merchandise by 4.8% (2006: 4.2%) and by 13.1% (2006: 13.1%) in food, including the first large-format food market at Farrarmere in Gauteng.
Financial Services
Revenue increased by 39.0% as a result of growth in the combined books of 20.5% and increases in interest rates. Book growth has slowed significantly from the second quarter. The interest yield increased to 22.9% (2006: 18.9%).
The tougher collections environment resulted in net bad debt, including collection costs, increasing to 7.8% (2006: 4.1%) of the gross book.
Country Road |
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Country Road had a strong sales performance, growing turnover by 35.0% in Australian dollar terms. Retail sales, excluding concession sales, grew by 21.4% in Australian dollars and by 16.5% in comparable stores compared to the prior period. The focus on providing better value and improved fashionability continues to be well received by customers.
Prospects
Higher interest rates and the shift in the credit environment has and is impacting our business. The group’s focus will remain on price competitiveness, product innovation, quality and tight cost control. We expect the difficult current trading conditions to prevail throughout 2008 and consequently the second half profits will remain under pressure.
Change to the board of directors
On 20 February 2008 Mair Barnes resigned from the board as a non-executive director. The board would like to thank Mair for her contribution to the group and wishes her success in her future endeavours.
| DA Hawton | SN Susman | |
| Chairman | Chief executive officer | Cape Town, 20 February 2008 |
dividend payment
Notice is hereby given that the directors have declared an interim cash dividend of 29.5 cents per ordinary share for the twenty six weeks ended December 2007.
The salient dates for the dividend will be as follows:
| Last day to trade to receive dividend | Friday, 7 March 2008 |
| Shares commence trading “ex” dividend | Monday, 10 March 2008 |
| Record date | Friday, 14 March 2008 |
| Payment date | Monday, 17 March 2008 |
Share certificates may not be dematerialised or rematerialised between Monday, 10 March 2008 and Friday, 14 March 2008, 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 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.
An interim cash dividend of 3.2 cents per preference share for the twenty six weeks ended December 2007 will be paid to the beneficiaries of the BEE employee share ownership scheme on 17 March 2008.
| CL Lowe | |
| Group secretary | Cape Town, 20 February 2008 |
directorate and statutory information
Non-executive directors: Buddy Hawton (Chairman), Peter Bacon (British), Mair Barnes (British), Nigel Colne (British), Judy Dlamini, Brian Frost, Mike Leeming, Chris Nissen, Sindi Zilwa
Executive directors: Simon Susman (CEO), Richard Inskip, 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: Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street, Johannesburg 2001