Listed South African retailer Woolworths (WHL) has reported a 21.3% rise in its headline earnings per share (HEPS) for the year to end-June 2004, to 78.6 cents from 64.8 cents a year earlier. The group declared a final cash distribution from share premium of 25.5 cents per share, for a total dividend for the year of 38.5 cents, up 32.8% from the 29 cents declared in 2003.
Announcing its final results on Thursday, Woolworths said revenues totalled 11.28 billion rand, an 11.8% increase over the 10.1 billion rand recorded a year earlier. Of the total, Woolworth's store operations saw revenue rise 12.3% to 9.75 billion rand from 8.5 billion rand previously, while the group's Australian retail operations, Country Road, recorded a 12.3% decline to 948.6 million rand from 1.1 billion rand previously.
Its financial services business, meanwhile, saw revenue rise 7.6% to 647 million rand.
Group net profit before tax improved by 20.3% to 936.7 million rand from 778.4 million rand in 2003, with Woolworths notching up a 30.1% rise to 715.6 million rand and Country Road posting a disappointing 32.8% decline to 8.8 million rand. Financial services saw net profit before tax falling 1.3% to 212.3 million rand.
Total operating profit exceeded 1.0 billion rand for the first time, up 19.6% to 1.06 billion rand versus 888 million rand a year earlier, benefiting from improved efficiencies and stringent cost control. Distribution cover fell to 2 times from 2.2 times in 2003.
The group's total return on equity for the year improved to 25.7% from 23.7% in 2003, and compares to 12.9% in 2001.
Commenting on trading conditions, CEO Simon Susman said the South African retail environment was characterised by buoyant consumer demand, boosted by low interest rates and personal debt levels. However, the strong rand had dented
performance in the group's Australian operations, where consumer spending growth had been supported by improved tax benefits.
In the Woolworths operating group, Clothing and Home grew turnover by 12% (9% in comparable stores), with imported merchandise, cheaper through the strengthening of the rand, making the company less competitive. The Foods business grew by 19.2% (7.8% in comparable stores), well ahead of the market.
Growth in Foods was particularly rapid in the second half of the year - despite the drop in food inflation in the second half of the year, sales were higher than the 17.7% growth achieved in the first half of the year. The group said posted a further rise in food market share - from 7.0% to 7.4%.
In Financial Services, substantial growth of 30.2% in Woolworths' in-store card, credit card, and personal loan books was countered by an 8.0% reduction in the usury rate over the period, resulting in a decline in net profit before tax from 215.2 million rand to 212.3 million rand. Bad debt continued to be well managed, representing 1.7% of advances.
Country Road's sales declined by 6.5% in Australian dollar terms, in part affected by reduced wholesale sales following the decision to focus on a single wholesale customer. In addition, sales in rand terms were negatively impacted by the strengthening of the rand against the Australian dollar.
It achieved a small profit before tax of A$2.5m. The repositioning of Country Road, which began from July with a new brand presentation and better, more customer-focused ranges was expected to start to show benefits.
Looking ahead, the group said the retail environment continued to experience solid growth on the back of lower interest rates and inflation. Consumer spending was expected to remain strong well into the year.
In Woolworths ,the repositioning in Menswear and Childrenswear, growth in Ladieswear, Home and Foods and a drive to grow the Woolworths card book should result in further real sales growth in the next year. In addition, focus on supply chain efficiencies and expense control would continue.
As announced, the group had embarked on a process to evaluate alternatives in order to optimise its financial services balance sheet structure. In the event of such a restructure, the board would consider how it wishes to dispose of surplus funds which may result from this process.
For the next financial year, approved capital spending was set to rise to 298.5 million rand from 189.2 million rand budgeted in 2003, with Woolworths' share at 259.1 million rand and Country Road at 39.4 million rand versus 36.6 million rand a year earlier.
I-Net Bridge
Publisher: Business Day
Source: Business Day
