director's report - woolworths holdings limited

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Group turnover from continuing operations rose by 24.2% to R8 421,4m. Woolworths grew sales 22.6% in the 53 weeks to June to R7 302,0m, compared to a 52 week period last year, with the impact of the additional week adding approximately 2.3%. Sales on a comparable store basis increased 15.5% against last year. Consumer spending in South Africa was positive throughout the period with Textiles sales for the 53 weeks increasing by 17.7% against last year (12.2% on a comparable store basis) and Food sales by 28.7% against last year (18.7% on a comparable store basis). Total trading area in Woolworths grew 4.2% to 333 692m 2 as a result of 13 new store openings, which added 8 800m 2 . Eight stores, totalling 7 150m 2 ,were converted to the franchise format, which now accounts for 65 002m 2 of the total trading space.Textiles footage now totals 266 635 m 2 (62 119 m 2 franchise) and Foods footage 67 057m 2 (2 883m 2 franchise). Country Road’s revenue from continuing operations grew by 3% in Australian dollar terms to A$207m, but translated into 36% growth in rand terms, to R1 125m. After the closure of the USA operations, Country Road now trades from 44 stores with a total footage of 23 560m 2 . Gross profit margin in Woolworths, increased marginally to 31.4%, but fell from 52% to 50% in Country Road due to increased promotional activity to counter significant discounting among competitors and an unusually warm winter. Interest received increased 20.6% to R355,5m. R341,7m was earned by Woolworths Financial Services, with the Woolworths Card growing in line with sales and the personal loan offering showing strong growth. Growth in income was constrained by the usury rate, which, for several months in the second half, failed to keep pace with increases in the prime lending rate. Operating expenses were well managed during the year growing 17.5% in Woolworths, as a result of increased trading activity, whilst Country Road’s costs in their continuing operations were 5.9% lower in Australian dollar terms as a result of head office rationalisation following the closure of the USA operations. Costs were 22.6% up in rand terms.A large portion of the operating costs in Woolworths are variable, particularly in the Foods business, and move in line with the increase in sales volumes. w oolwor t hs 45 annual <strong>report</strong>
Operating profit from continuing operations increased by 45.8% to R685,2m, Woolworths contributing R663,1m and Country Road R22,1m, although the latter benefited from second quarter A$ profits being translated at an exchange rate significantly weaker than the rate at which first quarter A$ losses were sustained. Finance costs increased 8% in Woolworths as a result of strict working capital management during the year and a higher level of cash resources for a large part of the year as a result of property disposals in December 2001. In Country Road, borrowing costs increased A$0,8m to A$1,1m due to higher cash flow requirements experienced in the first half of the year. Net profit before tax and exceptional items, from continuing operations, increased 47.7% to R599,2m.The exceptional items relate to a R17,2m impairment of the Claremont store property after having taken the decision to relocate into Cavendish Square; goodwill amortisation of R12,1m arising mainly from the acquisition of inthebag from Wooltru; a loss of R4,8m on the disposal of a listed investment and a provision of R7,4m in respect of an indemnity given by the company. The effective tax rate, from continuing operations before exceptional items, was down from the previous year at 32.1% (2001: 33.9%) reflecting the benefit of the assessed loss in Country Road, enhanced by the translation benefit of the rand’s sharp decline. Discontinued Operations: Country Road’s exit from the USA market resulted in a write off of net assets amounting to A$18,9m and other costs and provisions of A$5,0m, which translated to R122,6m after minority interests. Capital expenditure amounted to R335,0m offset by proceeds on disposals of R146,7m, R108,0m of which related to the sale of certain non-strategic properties for which long term leases have been entered into. Shares issued under the share purchase scheme raised R41,3m, whilst shares totalling R134,7m, repurchased by a subsidiary company as treasury stock under the shareholders’ authority granted at last year’s annual general meeting, were repurchased at an average price of R4,05 per share. finance direc w oolwor t hs 46 annual <strong>report</strong>
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director's report - woolworths holdings limited

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