Basis of preparation
The interim financial statements comply with IAS 34 Interim Financial Reporting. These condensed consolidated financial statements do not contain all the information and disclosures required in the annual financial statements and should be read in conjunction with the group consolidated annual financial statements as at June 2007.
Significant accounting policies
The accounting policies applied are consistent with those followed in the preparation of the consolidated annual financial statements for the 52 weeks ended June 2007, except for the adoption of IFRS 7 Financial Instruments: Disclosure that became effective during the current period and had no impact on the reported results.
Headline earnings per share and diluted headline earnings per share have been calculated in terms of Circular 8/2007: Headline Earnings for both the current and prior period.
Seasonality of turnover
No material variations in the turnover of the group are expected to occur between the first and second half of the financial year.
Tax
The tax rate of 36.9% (2006: 32.5%) results from the estimated average annual effective income tax rate of 30.1% plus Secondary Tax on Companies (STC) on the final dividend for the 52 weeks ended June 2007, paid in September 2007. The estimated annual effective rate is higher than the corporate tax rate of 29% mainly due to the impact of the non-deductible IFRS 2 charge arising from the BEE employee share ownership scheme and the group’s share incentive scheme.
Restatement of comparative figures
Headline earnings per share and diluted headline earnings per share for the twenty six weeks to December 2006 were restated to reflect a foreign exchange profit of R1.1m on the repayment of a loan by a subsidiary.
Net bad debt and the bad debt provision are disclosed separately in the income statement for the current and comparative period. Previously this was included in other operating costs.
Comparative balance sheet figures have been restated as a result of the restatement of share purchase scheme participants’ loans and investments to reflect their amortised cost.
Earnings per share
The difference between earnings per share and diluted earnings per share is the impact of outstanding options under the group share incentive scheme and preference shares issued in terms of the BEE employee share ownership scheme.
Property, plant and equipment
During the twenty six weeks ended December 2007, the group acquired assets with a cost of R362.0m (2006: R409.3m). Assets with a net book value of R35.1m (2006: R19.9m) were disposed of by the group during the same period, resulting in a profit of R0.1m (2006: R1.8m).
Issue of shares
During the twenty six weeks ended December 2007, 2 818 254 (2006: 3 139 956) ordinary shares were issued in terms of the group’s share incentive scheme.
The Woolworths BEE employee share ownership scheme
During the twenty six weeks ended December 2007, 88 267 306 convertible, redeemable, non-cumulative participating preference shares were issued to employees of the group in terms of the BEE employee share ownership scheme.
This resulted in an additional share-based payment charge of R25.5m being recognised in employment costs.
A dividend of 5.1c (11% of the final ordinary dividend of 46.5c declared in August 2007) was declared during the twenty six weeks ended December 2007. No adjustment for the preference dividend in the calculation of basic and headline earnings was required at June 2007 as the preference shares were only issued after the 2007 year end.
Implementation of the scheme resulted in net dilution of 0.8% for the twenty six weeks ended December 2007.
Contingent liabilities
The holding company provides sureties for the banking facilities and lease obligations of certain subsidiaries. In the opinion of the directors, the possibility of loss arising therefrom is remote.
Borrowing facilities
Unutilised banking facilities amount to R3 900.0m (2006: R1 168.1m). In terms of the articles of association, there is no limit on the group’s authority to raise interest-bearing debt.
Events subsequent to balance sheet date
Notes issued under the Account On Us (Proprietary) Limited asset-backed notes programme totalling R436.0m mature and will be redeemed on 25 February 2008.
Related party transactions
During the twenty six weeks to December 2007, group companies entered into various transactions. These transactions were entered into in the ordinary course of business and under terms that are no less favourable than those arranged with independent third parties. All such intra-group related party transactions and outstanding balances are eliminated in preparation of the consolidated financial statements of the group.
Unaudited results
These results have not been reviewed or audited.
Approval of interim financial statements
The interim financial statements were approved by the board of directors on 20 February 2008.
