operating review

SA Retail

Economic conditions have remained tough in the period. Our segmented, more innovative merchandise offer and improved values has attracted more customers into our Woolworths stores.

Improved product margin and good cost control has increased the operating profit margin from 6.7% to 7.5%.

Total footage grew by 5.7%, with a year on year increase of 5.2% in clothing and general merchandise and 6.9% in food at the end of December 2009. We anticipate the level of new store rollouts to be more modest with a focus on larger food stores and full-line stores.

Clothing and general merchandise

Clothing and general merchandise sales increased by 9.7% with market share gains made for the last nine months. Comparable store sales have increased by 6.2%.

Operating profit margin has increased from 12.0% to 13.1% as a result of the targeted and focused sourcing programme and good cost control. Price movement at 11.8% is mainly due to the impact of a weaker rand when this summer merchandise was procured.

Food

Food sales increased by 8.9%, with a gain in market share in the last two months of trade. Comparable store sales have increased by 4.7%.

Operating profit margin has increased to 3.8% from 3.4%, driven by our repositioned prices and value offering. Price movement has declined from 8.2% at June 2009 to 6.3% at the end of December 2009, and is expected to decline further.

Country Road

The trading conditions in Australia have been tough. The government’s fiscal stimulus packages of the previous year have not been repeated again this year and there have been three interest rate increases in the last six months.

Sales for the period were 12.6% up on last year with comparable store sales of 4.7% (in Australian dollar terms). Market share continues to improve. Customer reaction to the launch of the new brand, Trenery, in both Australia and South Africa has been positive.

The operating profit margin of 6.7% (December 2008: 8.4%) has been negatively impacted by the start-up costs of the Trenery brand.

Woolworths Financial Services (WFS)

The results of WFS segment are not comparable with last year. For the period ended December 2009 they are equity accounted as a joint venture for the full period, whilst for the period to December 2008 they were accounted as a subsidiary for the first quarter and equity accounted for the second quarter.

Consumers continue to manage their use of credit. They are not taking on significant amounts of additional credit and are continuing to extend their credit terms.

The closing debtors’ books have increased by 1.2% year on year at the end of December 2009. Bad debts have been well controlled with the impairment rate for the period at 6.2% down from December 2008 of 7.6% and June 2009 of 7.5%.

Outlook

Conditions in South Africa and Australia will remain challenging. In South Africa, the upper income consumer is more confident.

As we move out of recession, the group is better positioned to take advantage of any upliftment in consumer spending.

DA Hawton	SN Susman
Chairman	Chief Executive Officer

Cape Town, 17 February 2010

notice of distribution

Notice is hereby given that the directors have resolved to make a capital reduction out of share premium of 38.0 cents per ordinary share in lieu of the interim dividend for the twenty-six weeks to 27 December 2009 (“cash distribution”). The cash distribution will be made out of the Company’s share premium account if shareholders in general meeting pass the requisite resolution contained in the circular posted to shareholders on 29 January 2010, authorising the directors to allot and issue ordinary shares for cash to the Company’s wholly-owned subsidiary, Woolworths (Proprietary) Limited. Shareholders are referred to the announcement released on SENS on 20 January 2010 in this regard.

If however, such authority is not obtained from the shareholders, an interim dividend of 38.0 cents per ordinary share for the twenty-six weeks to 27 December 2009 will be paid.

In terms of paragraph 11.31(d) of the JSE Listings Requirements the Company is required to disclose the financial effects of the cash distribution.

The table below sets out the unaudited pro forma financial effects of the cash distribution on net asset value (“NAV”) and net tangible asset value (“NTAV”) per share based on the published unaudited results of the Company for the twenty-six weeks to 27 December 2009.

The unaudited pro forma financial effects are the responsibility of the directors and have been prepared for illustrative purposes only and, because of their nature, may not provide a fair reflection of the Company’s financial position after the implementation of the cash distribution.

Shareholders are advised that, as the cash distribution is being made in lieu of an interim cash dividend, there will be no additional or abnormal reduction in the cash and cash equivalents and equity attributable to shareholders of the Company.

	Unaudited unadjusted	Pro forma
	results for the	results for the
	twenty-six weeks to	twenty-six weeks to
	27 December 2009	27 December 2009	%
	before the distribution(1)	after the distribution(2)	change
NAV per share	407.7	369.7	(9.3)
TNAV per share	359.7	321.7	(10.6)

Notes:
1.	As per the published unaudited results of Woolworths for the twenty-six weeks to 27 December 2009.
2.	Adjustments to NAV per share and TNAV per share were made on the assumptions that:
	–	the cash distribution to shareholders was paid on 27 December 2009; and
	–	the cash distribution is paid from cash resources and accordingly cash and cash equivalents and share premium are reduced by R290.4 million.

The salient dates for the distribution or dividend will be as follows:

	2010
Last day to lodge proxy forms (by no later than 11h00) for the general meeting on	Tuesday, 23 February
General meeting held at 11h00 on	Thursday, 25 February
Results of general meeting announcement published on SENS	Thursday, 25 February
Results of general meeting announcement published in the press on	Friday, 26 February
Finalisation announcement released on SENS	Friday, 12 March
Last day to trade to be eligible to receive the cash distribution or dividend	Thursday, 25 March
Shares trade “ex” the cash distribution or dividend	Friday, 26 March
Record date for the cash distribution or dividend	Thursday, 1 April
Cash distribution or dividend paid to certificated ordinary shareholders on	Tuesday, 6 April
Cash distribution or dividend credited to accounts of dematerialised ordinary shareholders held by their CSDP or broker on	Tuesday, 6 April

Notes:
1.	Any change to the above dates and times will, subject to approval of the JSE, be communicated to shareholders by notification on SENS and in the press.
2.	All times indicated above are South African local times.
3.	Share certificates may not be dematerialised or rematerialised between Friday, 26 March 2010 and Thursday, 1 April 2010, both days inclusive.

In accordance with the Company’s Articles of Association a distribution of dividend 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 will be donated to a charity nominated by the directors.

An interim cash dividend of 8.7 cents per preference share for the twenty-six weeks to 27 December 2009 will be paid to the beneficiaries of the Woolworths Employee Share Ownership Scheme on Tuesday, 6 April 2010.

CL Lowe
Group secretary

Cape Town, 17 February 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 (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

JSE sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)

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