RNS Number:0774E
Woolworths Group PLC
19 September 2007
Woolworths Group plc
Half-Year Results Announcement
For the 26 weeks ended 4 August 2007
Embargoed until 07.00 hrs 19 September 2007
Financial Performance
Half-year adjusted loss #59.2 million against #66.8 million last year
Loss before taxation pre exceptional from continuing operations #64.7 million
compared with #73.6 million in the prior year
First half Group sales from continuing operations up 16.1 per cent in the 26
weeks to 4 August 2007
Woolworths half-year like-for-like sales up 0.6 per cent
Interim Dividend remains at 0.43 pence per share
Operational Highlights
Woolworths launch of Worth It! range and Big Red Book II
Retail gross margin improved by 110 basis points
EUK secures contract to supply Entertainment ranges to ASDA
Acquisition of Bertram Group cleared by Competition Commission
Trevor Bish-Jones, Chief Executive of Woolworths Group plc, said:
"Our first half performance is encouraging. The major contributor to the
improved performance was the retail business, but we have made progress across
all parts of the Group. Going forward, we remain cautious about the retail
environment going into the important second half - so are continuing to run the
business tightly, with a focus on cash, cost control and margins."
The Company's Half-Year Report for the 26 weeks to 4 August 2007 is published
today on its website: www.woolworthsgroupplc.com
For further information contact:
Stephen East, Finance Director 020 7479 5179
Kirstie Hamilton, Tulchan Communications 020 7353 4200
Celia Gordon-Shute, Tulchan Communications 020 7353 4200
1. OVERVIEW OF FINANCIAL PERFORMANCE
The first six months of the financial year have seen significant progress made
across all parts of the business. In the half-year to 4 August 2007, the Group
achieved an #8.9 million improvement in the reported loss before tax and
exceptional items of #64.7 million as compared with #73.6 million for the same
period last year.
The half-year adjusted loss (which is before tax, exceptional items, adjustment
for fixed rental uplifts and amortisation of certain intangible assets) has
reduced to #59.2 million from #66.8 million. However, the adjusted operating
result of the Entertainment Wholesale business declined by #7.2 million. This
was caused by the level of significant operational change, incurring substantial
set-up costs and initially impairing operational efficiency.
Total Group sales for the half-year are up by 16.1 per cent to #1,141.2 million.
26 weeks to 4 August 2007
Entertainment
Wholesale and
Publishing
Retail #m Central Interest Total
Continuing operations #m #m #m #m
Reported (loss)/profit before taxation (40.9) (9.0) (5.1) (8.8) (63.8)
Adjust for: exceptional items (8.5) 7.6 - - (0.9)
(Loss)/profit before exceptional items (49.4) (1.4) (5.1) (8.8) (64.7)
Add back: fixed rental uplift* 1.7 - - - 1.7
Add back: amortisation of certain intangible
assets** - 3.8 - - 3.8
Adjusted (loss)/profit (47.7) 2.4 (5.1) (8.8) (59.2)
26 weeks to 29 July 2006
Entertainment
Wholesale and
Publishing
Retail #m Central Interest Total
Continuing operations #m #m #m #m
Reported (loss)/profit before taxation (61.1) 5.7 (4.5) (5.0) (64.9)
Adjust for: exceptional items (8.7) - - - (8.7)
(Loss)/profit before exceptional items (69.8) 5.7 (4.5) (5.0) (73.6)
Add back: fixed rental uplift 5.3 - - - 5.3
Add back: amortisation of certain intangible
assets** - 1.5 - - 1.5
Adjusted (loss)/profit (64.5) 7.2 (4.5) (5.0) (66.8)
* Net of #2.2 million benefit from leases assigned
** Excludes amortisation of certain intangible assets arising on consolidation,
namely underlying rights, customer relationships and trade names.
2. OPERATING REVIEW
Retail
The first half adjusted operating loss from Woolworths retail was #47.7 million.
This #16.8 million improvement over the prior year has been driven by enhancing
our product margins, profit on disposal of leases of #5.1 million (up from #2.9
million) and the benefit of asset relifing of #6.9 million alongside continued
cost control. The gross margin rate for the first half is up by 110 basis
points.
At a category level all product areas which have a natural bias towards indoor
usage have benefited from the marked contrast in the year-on-year weather
patterns.
Additionally, some areas of the business have performed strongly on the back of
category specific factors. For example, the Computer Games market has shown
significant year-on-year sales increases following new platform launches such as
Nintendo Wii. This along with strong sales of books (in part due to the seventh
Harry Potter book) and a DVD market underpinned by a stronger release schedule
have been more than enough to offset a decline in the music market. Looking
forward, we expect this positive trend to continue through the second half of
the year.
Another area of particular strength has been Ladybird clothing. Following a
major investment in our instore merchandising during the second half of 2006, we
have carried momentum into the first half of this year and have grown both sales
and market share.
The single biggest product initiative undertaken in the first half was the
launch of the 'Worth It!' branded range. This comprised nearly 500 products
spread across every category instore, positioned to be competitive with entry
price points to be found in our supermarket competitors. Using a consistent
livery, the range presents a very clear statement about the competiveness of
Woolworths' prices. Both the value and volume of sales of the range have
exceeded internal forecasts. A media advertising campaign to attract new
customers will be undertaken in the second half of the financial year.
During the period we continued to develop our multichannel offering. The most
visible element was the launch in March of our second Big Red Book catalogue.
The catalogue provided an excellent vehicle to showcase our product ranges to
customers either instore or in their own home, particularly physically large
product that would otherwise be very difficult to display in the majority of the
store estate. Despite the inclement weather, overall sales of outdoor toys have
increased alongside good growth in market share.
The supply chain that supports our multichannel offer has also progressed. With
the majority of customers electing to collect their orders instore rather than
having them home delivered, it is pleasing that approaching 90 per cent of
customer-collected orders are now moving through our routine supply chain rather
than using third party couriers. This has a significant impact on the overall
profitability of our multichannel sales.
Total multichannel sales in the first half increased by 93.2 per cent. Although
we expect the year-on-year growth rate to slow in the second half, we still
anticipate increased sales. It has therefore been necessary to increase our
fulfilment capacity, and to achieve this cost effectively, a warehouse vacated
by THE in Stoke has been converted into a multichannel fulfilment centre for
Woolworths.
Improvements to the supply chain and IT system that facilitate the effective
deployment of stock are contributory factors to the year-on-year 110 basis point
improvement in margin and a reduction of stock in Woolworths of #18.2 million at
the half-year. The stock reduction has had no adverse impact on availability
levels which have, on continuity lines, run at historic highs.
Across the property portfolio we continue to refine the estate in a controlled
manner realising an adjusted profit of #5.1 million (#2.9 million in the prior
year). During the period we closed one store and will open four new stores this
year. We also have nine new stores in our property pipeline.
Entertainment Wholesale and Publishing
The Entertainment Wholesale business had a more difficult half year reflecting
the major changes to, and added complexities within, the business. Its result
was #7.2 million worse than the same period last year. That said, the costs of
these changes have now largely been expended, leaving the business in better
shape going forward.
Whilst sales to third party customers in EUK declined by 2.9 per cent, overall
third party sales in this division (including Bertrams and THE) rose by 56.8 per
cent (37.5 per cent excluding Bertrams).
During last year and in the early part of this financial year we made several
pivotal announcements as we pursued our strategy of strengthening the EUK
business by increasing its customer base and broadening the range of product
categories it supplies. This strategy became all the more critical following the
loss after Easter 2007 of the Tesco entertainment account. This was a major loss
of turnover that clearly would need to be replaced.
In September 2006, we announced the acquisition of THE, a business similar to
EUK which in part replaced some of the lost turnover but also gave us entry into
primary distribution of Entertainment products and an enhanced capability in
Books and in the same month announced the acquisition of Bertrams, a wholesale
distributor of Books and in the same month announced the contract to buy and
supply Entertainment products on behalf of Virgin Retail. More recently in May
2007, we announced an agreement with ASDA to supply their music, computer games
and part of their DVD range, commencing in August 2007.
The combined effect of these contract wins and acquisitions has been to
diversify the customer base across the four major entertainment and book markets
and to increase forecast annual turnover to #1.5 billion.
These events have necessitated a significant amount of operational activity.
Supplies of CDs, DVDs and Computer Games to Tesco ceased after Easter which
released capacity in our West London Distribution centres. We were then able to
migrate customers serviced out of the THE site in Stoke to these London
facilities. The Stoke site, whilst continuing to distribute Books, was
decommissioned for the supply of Entertainment and a process to convert the
facility to a multichannel fulfilment centre for Woolworths commenced.
EUK simultaneously geared itself up to supply the extended range of product into
the Virgin stores and, after piloting, full supply commenced in June. Pilot
supply to ASDA commenced in July with full supply going live in August.
Alongside these headline activities have come complex IT issues, necessary
consultative redundancy programmes and staff training. The business focus is now
on ensuring high levels of customer service over the key Christmas trading
period. It has previously been highlighted that there would be significant
one-off integration costs associated with delivering this amount of change, only
some of which are treated as exceptional for accounting purposes.
A further complication during the reported period was the referral of the
acquisition of Bertrams by the OFT to the Competition Commission for
investigation. Considerable management time has been required to provide the
regulatory authorities with the information and understanding that they needed
to reach an informed ruling. As previously reported, we are pleased that the
Competition Commission has now cleared the acquisition. As a result of the
referrals, additional costs have been incurred to support our submissions to the
regulatory bodies and to comply with the "hold separate" undertakings put in
place.
The traditional entertainment markets are, in the longer term, threatened by the
advent of digital alternatives. This is already apparent in the music market
where digital downloading is a significant influence. Our assessment is that the
DVD and Games categories will be slower to 'go digital' and that the physical
market will continue to hold significant share for the foreseeable future.
Nevertheless, it is important to establish a position for EUK in the digital
world.
In recent years we have built a digital database of music tracks which now
extends to 2.3 million tracks and is used to support our customers' online
business. Over the past six months the focus of our digital development has been
to widen our technical and content capabilities. We are endeavouring to build a
'digital vault' that will hold entertainment content in downloadable formats for
all types of devices. We anticipate that the first EUK customers to offer this
service will come on stream in early 2008.
We have made significant steps towards building a better quality business with a
more sustainable model.
2entertain
2entertain has enjoyed buoyant sales in the first six months of the financial
year and is running ahead of internal forecasts. During the half-year 145 DVD
titles and 157 audio CD titles have been launched. A particularly encouraging
feature of the growth is that it is in international sales, particularly
America, where we are seeing the fastest growth. This supports our strategy to
widen the sales base outside the UK. In America this is particularly being
driven by 'Planet Earth' especially in its high definition formats.
The 'Planet Earth' high definition DVD is an exceptional viewing experience and
shows off the technology to great effect. With an ever increasing number of high
definition players being sold into the US market every week there is an on-going
demand for the product. Launched in April, the title is still enjoying a
prominent position in the weekly DVD chart. Its success has raised the profile
of 2entertain and BBC licensed product in America and has opened up distribution
channels beyond the 'back catalogue' offering of the specialist retailers,
gaining product listings in volume retailers such as Walmart.
Key to the success of 2entertain is maintaining a healthy pipeline of future
product for release. Over the past six months we have continued to exploit our
existing relationships and in addition have entered into new or renewed output
deals with a number of independent production houses.
The release schedule for the upcoming peak season looks strong with the most
significant DVD titles likely to be 'Clarkson Supercar Showdown' and 'Catherine
Tate, Series 3' and on CD, 'Foster and Allen - Love and Laughter'.
3. BORROWINGS AND CAPITAL EXPENDITURE
Capital expenditure in the first half has been tightly controlled. We undertook
no major refit activity. Total retail capital expenditure in the half was #18.0
million and this included #5.1 million on freehold acquisitions. In the run up
to Christmas we will undertake a 'light touch' programme of changes to all
stores reallocating space strategically, introducing range intensification into
small and medium size stores and reconfiguring a number of stores to make them
operationally more efficient. This initiative commenced in late July and
completes in October. The adjusted loss for the Group in the first half
benefited by #8.8 million from reduced depreciation as a result of changes to
the expected lives of various assets. Net debt at the half-year was #218.0
million.
4. DIVIDEND
We are maintaining the interim dividend of 0.43 pence per share and intend to
rebuild dividend cover, as measured in relation to earnings per share, as
performance improves. The dividend will be paid on 12 December 2007 to
shareholders on the register at close of business on 28 September 2007.
5. EXCEPTIONAL ITEM
The exceptional item consists of three parts. The gain on the sale of the
Channel Island store freeholds of #8.5 million is partly offset by (i)
exceptional costs in the Entertainment Wholesale business of #4.2 million
relating to the integration of the EUK and THE businesses and the costs of the
Competition Commission enquiry into the acquisition of Bertrams, and (ii) a
provision of #3.4 million in relation to potential payments due under the terms
of establishing the 2entertain joint venture which were not able to be
ascertained at that time.
6. PRINCIPAL RISKS
The principal risks and uncertainties facing the Group for the remaining six
months of the year have been and are as at the date of this report:
(i) Competition
The Group operates in highly competitive markets. In particular, in recent
years the retail landscape has seen significant changes and trends in retail and
consumer behaviour and spending which are challenging for Woolworths Retail.
The Group has faced and expects to face increased competition from existing UK
general and specialist retailers, food retailers that have expanded and are
further expanding into general merchandising, foreign retailers entering the UK
market and newly formed competitors.
(ii) Growth of the Digital Entertainment Market
A key driver of footfall and sales within the Woolworths stores and the core
stock-in-trade for EUK, THE, Bertrams and 2entertain is physical entertainment
media i.e. CDs, DVDs, Books and Games.
In recent years, technology advances and changing consumer preferences have
given rise to new markets providing delivery of music, films, games and books to
portable players and to the home via digital delivery, bypassing the purchase of
traditional physical media platforms. This trend may result in decreased demand
for such products in stores.
(iii) Seasonality
The Group's business is highly seasonal. Historically, the Group's most
important trading period in terms of sales, profitability and cash flow has been
the Christmas season. Lower than expected performance in this period may have
an adverse impact on results for the full-year which may also result in excess
inventory especially in seasonal merchandise that is difficult to liquidate.
Further details of the Group's risk profile and its approach to risk management
can be found in the Annual Report.
7. OUTLOOK
We are encouraged by the improved financial performance of Woolworths in the
first half. We expect that our strategic initiatives such as improving our
multichannel capability, the roll-out of the 'Worth It!' range and our space
reallocation plan, will continue to have a positive impact in the second half.
As ever though, the key driver of our performance will be how well the business
trades over the Christmas period.
The months leading up to Christmas also mark the period of greatest demand for
our distribution and fulfilment operations, in both Retail and Entertainment
Wholesale. Given the magnitude of operational change already undertaken,
ensuring that we are set up to meet this year's peak flow is a priority.
The recent rise in interest rates and uncertainty surrounding the financial
markets makes it difficult to predict consumer demand for the key Christmas
selling period. We have planned for our product markets to remain competitive
and to keep our costs under control to maintain momentum on our margin delivery.
There is the potential for the Entertainment sector to provide a positive
stimulus across the entire Group. The strength of the DVD release schedule is
superior to last year and we expect the computer games market to trade strongly
on the back of the new platform releases.
Group Income Statement (Unaudited)
for the 26 weeks ending 4 August 2007 and 29 July 2006
26 weeks to 4 August 2007 26 weeks to 29 July 2006
Before Exceptional Before Exceptional
exceptional items exceptional items
items Note 2 Total items Note 2 Total
Note #m #m #m #m #m #m
Continuing Operations
Revenue 1 1,141.2 - 1,141.2 982.9 - 982.9
Cost of goods sold (865.3) - (865.3) (739.3) - (739.3)
Gross profit 275.9 - 275.9 243.6 - 243.6
Selling and marketing costs (274.6) (2.2) (276.8) (264.7) 3.9 (260.8)
Administrative expenses (65.7) (5.4) (71.1) (56.0) 4.8 (51.2)
Other operating income 8.5 8.5 17.0 8.5 - 8.5
Operating loss 1,12 (55.9) 0.9 (55.0) (68.6) 8.7 (59.9)
Finance Cost (9.5) - (9.5) (6.4) - (6.4)
Finance Income 0.7 - 0.7 1.4 - 1.4
Loss before taxation (64.7) 0.9 (63.8) (73.6) 8.7 (64.9)
Taxation 3 20.9 (1.3) 19.6 22.7 (2.6) 20.1
Loss for the period after taxation (43.8) (0.4) (44.2) (50.9) 6.1 (44.8)
Attributable to:
Equity holders of the Company (43.8) (0.4) (44.2) (50.9) 6.1 (44.8)
(43.8) (0.4) (44.2) (50.9) 6.1 (44.8)
Loss per share (pence)
Basic and diluted 4 (3.0) (3.1)
Dividends
A dividend of 0.43 pence per share (2006: 0.43 pence per share) amounting to #6.2 million (2006: #6.2 million)
has been proposed for the interim period ending 4 August 2007 but remains unpaid at the period end. The final
dividend in respect of last year of 1.34 pence per share (2006: 1.34 pence per share) amounting to #19.4
million (2006: #19.4 million) was paid in the period (see note 5).
Group Statement of Recognised Income and Expense (Unaudited)
for the 26 weeks ending 4 August 2007 and 29 July 2006
26 weeks to 4 August 2007 26 weeks to 29 July 2006
Before Exceptional Before Exceptional
exceptional items exceptional items
items Note 2 Total items Note 2 Total
#m #m #m #m #m #m
Loss for the financial period (43.8) (0.4) (44.2) (50.9) 6.1 (44.8)
Actuarial gain on defined benefit scheme
net of tax 14.4 - 14.4 14.1 - 14.1
Deferred tax adjustment to 28% on
defined benefit scheme (1.4) - (1.4) - - -
Cash flow hedges:
- Fair value gains/(losses) net of tax 1.8 - 1.8 (3.6) - (3.6)
- Transfer to stock net of tax (2.2) - (2.2) 0.7 - 0.7
Net gains not recognised in income
statement 12.6 - 12.6 11.2 - 11.2
Total (losses)/gains recognised in the
financial period (31.2) (0.4) (31.6) (39.7) 6.1 (33.6)
All recognised losses are attributable to the equity shareholders of the parent
company.
Group Income Statement (Audited)
for the 53 weeks ending 3 February 2007
53 weeks to 3 February 2007
Before Exceptional
exceptional items
items Note 2 Total
Note #m #m #m
Continuing operations
Revenue 2,737.0 - 2,737.0
Cost of goods sold (2,045.8) - (2,045.8)
Gross profit 691.2 - 691.2
Selling and marketing costs (571.6) 3.9 (567.7)
Administrative expenses (125.1) 4.8 (120.3)
Other operating income 23.5 - 23.5
Operating profit 18.0 8.7 26.7
Finance cost (14.5) - (14.5)
Finance income 3.8 - 3.8
Profit before taxation 7.3 8.7 16.0
Taxation 3 0.2 (2.6) (2.4)
Profit for the year after taxation 7.5 6.1 13.6
Attributable to:
Equity holders of the company 7.4 6.1 13.5
Minority interest 0.1 - 0.1
7.5 6.1 13.6
Earnings per share (pence)
Basic and diluted 4 0.9
Dividends
A dividend of 1.34 pence per share (#19.4 million) was proposed but remained unpaid at the year end.
Dividends of 1.77 pence per share (#25.6 million) were paid in the year (see note 5).
Group Statement of Recognised Income and Expense (Audited)
for the 53 weeks ending 3 February 2007
53 weeks to 3 February 2007
Before Exceptional
Exceptional items
items Note 2 Total
#m #m #m
Profit for the financial year 7.5 6.1 13.6
Actuarial gain on defined benefit scheme net of tax 27.7 - 27.7
Deferred tax on share-based payments (0.1) - (0.1)
Cash flow hedges:
- Fair value losses net of tax (6.2) - (6.2)
- Transfer to stock net of tax 4.1 - 4.1
Net gains not recognised in
income statement 25.5 - 25.5
Total gains recognised in
the financial year 33.0 6.1 39.1
Of the total recognised gain for the year, #39.0 million is attributable to the
equity shareholders of the parent company.
Group Balance Sheet
at 4 August 2007, 29 July 2006 and 3 February 2007
Unaudited Unaudited Audited
4 August 2007 29 July 2006 3 February
2007
Note #m #m #m
Assets
Non-current assets
Goodwill 60.8 31.9 60.7
Other intangible fixed assets 83.0 60.4 84.0
Property, plant and equipment 10 305.2 290.6 311.7
Fixed asset investments 0.2 0.2 0.2
Deferred tax assets 8.3 38.1 1.0
457.5 421.2 457.6
Current assets
Inventories 421.8 366.3 377.1
Trade and other receivables 236.7 200.9 303.5
Financial assets
- Cash and cash equivalents 23.4 65.6 28.4
681.9 632.8 709.0
Current liabilities
Financial liabilities
- Borrowings 11 (239.9) (179.5) (129.8)
- Derivative financial instruments (26.1) (25.2) (27.5)
Trade and other payables (419.5) (384.5) (490.4)
Current tax liabilities (2.8) (1.3) (1.4)
Provisions (12.1) (13.9) (8.5)
(700.4) (604.4) (657.6)
Net current (liabilities)/assets (18.5) 28.4 51.4
Non-current liabilities
Financial liabilities
- Borrowings 11 (1.5) (1.2) (1.9)
Trade and other payables (74.1) (67.1) (72.4)
Retirement benefit obligations 8 (63.6) (102.3) (84.0)
Provisions (31.8) (28.2) (33.1)
(171.0) (198.8) (191.4)
Net assets 268.0 250.8 317.6
Shareholders' equity
Ordinary shares 13 182.4 182.2 182.4
Share premium 9.7 9.3 9.7
Other reserves 19.0 21.2 22.0
Retained earnings 56.9 38.0 103.5
Total shareholders' equity 6 268.0 250.7 317.6
Minority interest - 0.1 -
Total equity 268.0 250.8 317.6
Group Cash Flow Statement
for the 26 weeks ending 4 August 2007, 29 July 2006 and the 53 weeks ending 3
February 2007
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 29 July 3 February
2007 2006 2007
Note #m #m #m
Cash flows from operating activities
Cash utilised in operations (80.4) (192.8) (39.6)
Interest paid (9.5) (6.5) (12.6)
Interest received 0.7 1.7 2.5
Tax received/(paid) 6.4 (11.5) (13.4)
Net cash utilised in operating activities (82.8) (209.1) (63.1)
Cash flows from investing activities
Acquisition of subsidiaries (net of cash
acquired) - - (63.0)
Purchase of intangible assets (5.6) (3.4) (7.3)
Purchase of property, plant and equipment (14.3) (35.6) (69.1)
Proceeds from sale of property, plant and
equipment 7.6 6.0 -
Purchase of minority - - (2.8)
Net cash utilised in investing activities (12.3) (33.0) (142.2)
Cash flows from financing activities
Net proceeds from issuance of ordinary shares - 0.1 0.7
Repayment of borrowings - - (97.8)
Proceeds from bank borrowings 111.9 - 109.7
Debt issue costs (0.2) - -
Finance lease principal repayments (0.9) (0.1) (1.2)
Sale of own shares held by Trust - - (0.1)
Dividends paid to Company's shareholders 5 (19.4) (19.4) (25.6)
Net cash (utilised in)/generated from financing
activities 91.4 (19.4) (14.3)
Net decrease in cash and cash equivalents (3.7) (261.5) (219.6)
Cash and cash equivalents at beginning of the
period 27.1 246.7 246.7
Cash and cash equivalents at end of the period 7 23.4 (14.8) 27.1
Cash and cash equivalents consist of:
Cash 23.4 65.6 28.4
Bank loans and overdrafts - (80.4) (1.3)
Cash and cash equivalents at end of the period 7 23.4 (14.8) 27.1
Notes to the Accounts
General
Woolworths Group plc is a limited liability company incorporated, domiciled and
registered in England and Wales. The address of its registered office is 242 -
246 Marylebone Road, London NW1 6JL.
The Company has its listing on the London Stock Exchange.
This consolidated half-yearly financial information was approved for issue on 18
September 2007.
These interim financial results do not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985. Within the notes to the
accounts the 26-week periods are unaudited. Statutory accounts for the year
ended 3 February 2007 were approved by the Board of Directors on 27 March 2007
and delivered to the Registrar of Companies. The report of the auditors on
those accounts was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under Section 237 of the Companies Act 1985.
Basis of Preparation
This interim financial information for the half-year ended 4 August 2007 has
been prepared in accordance with the Disclosure and Transparency Rules of the
Financial Services Authority and with IAS 34, 'Interim financial reporting' as
adopted by the European Union. The half-yearly condensed consolidated financial
report should be read in conjunction with the annual financial statements for
the year ended 3 February 2007, which have been prepared in accordance with
IFRSs as adopted by the European Union.
Going Concern
The Group has gone through a period of significant change and expansion within
the Entertainment Wholesale business. As a result a detailed review has been
carried out of the financing needs of the enlarged business and it is expected
that new facilities will be put in place during the second half of the year.
The Directors have a reasonable expectation that this refinancing will be
concluded satisfactorily and continue to adopt the going concern basis in
preparing these accounts.
Accounting Policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 3 February 2007, as described in those
annual financial statements.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year ending 2 February 2008, but
have no material impact on the Group:
- IFRIC 7, 'Applying the restatement approach under IAS 29', effective for annual periods beginning on or after
1 March 2006.
- IFRIC 8, 'Scope of IFRS 2', effective for annual periods beginning on or after 1 May 2006
- IFRIC 9, 'Reassessment of embedded derivatives', effective for annual periods beginning on or after 1 June
2006.
- IFRIC 10, 'Interim financial reporting and impairments', effective for annual periods beginning on or after 1
November 2006. This interpretation has not had any impact on the timing or recognition of impairment losses
as the Group has already accounted for such amounts using principles consistent with IFRIC 10.
- IFRS 7, 'Financial instruments: Disclosures', effective for annual periods beginning on or after 1 January
2007.
- IAS 1, 'Amendments to capital disclosures', effective for annual periods beginning on or after 1 January
2007.
The following new standards, amendments to standards and interpretations have
been issued, but are not effective for the financial year ending 2 February 2008
and have not been early adopted:
- IFRIC 11, 'IFRS 2 - Group and treasury share transactions', effective for annual periods beginning on or
after 1 March 2007.
- IFRIC 12, 'Service concession arrangements', effective for annual periods beginning on or after 1 January
2008.
- IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009, subject to
EU endorsement.
1. Segmental Analysis
The Group considers that business segmental analysis is its primary reporting
basis. The Group's business is divided into a Retail segment and an
Entertainment Wholesale and Publishing segment. Woolworths plc, WMS Jersey
Limited, Tromax Limited and Flogistics Limited are included within the Retail
segment, with Entertainment UK Limited, Total Home Entertainment Distribution
Limited (THE), Bertram Group Limited (Bertrams), Disc Distribution Limited and
2entertain Limited being the constituents of Entertainment Wholesale and
Publishing. No material trading is undertaken outside the UK and consequently no
geographic segmentation has been shown.
26 weeks to 4 August 2007 (unaudited) 26 weeks to 29 July 2006 (unaudited)
Entertainment Entertainment
Wholesale Wholesale
and and Total
Retail Publishing Unallocated Total Retail Publishing Unallocated #m
#m #m #m #m #m #m #m
Continuing Operations
Group
-Gross revenue 695.6 588.9 - 1,284.5 691.1 444.8 - 1,135.9
-Intersegment - (143.3) - (143.3) - (153.0) - (153.0)
Revenue 695.6 445.6 - 1,141.2 691.1 291.8 - 982.9
Operating profit/(loss)
before exceptional items (49.4) (1.4) (5.1) (55.9) (69.8) 5.7 (4.5) (68.6)
Exceptional items 8.5 (7.6) - 0.9 8.7 - - 8.7
Operating profit/(loss)
after exceptional items (40.9) (9.0) (5.1) (55.0) (61.1) 5.7 (4.5) (59.9)
Finance cost (9.5) (6.4)
Finance income 0.7 1.4
Loss before taxation (63.8) (64.9)
Taxation 19.6 20.1
Loss for the year (44.2) (44.8)
Attributable to:
Equity shareholders (44.2) (44.8)
Minority interest - -
(44.2) (44.8)
2. Exceptional Items
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 2007 #m 29 July 2006 3 February 2007
#m #m
Operating exceptional items are analysed as follows:
'A-Day' pension credit - 8.7 8.7
Woolworths property income 8.5 - -
Competition Commission and restructuring costs (4.2) - -
Capital contribution to 2entertain arising on joint
venture (3.4) - -
0.9 8.7 8.7
Taxation (1.3) (2.6) (2.6)
Exceptional items after taxation (0.4) 6.1 6.1
During the interim period Woolworths plc has completed sale and leaseback
agreements for the properties in Jersey and Guernsey. The profit from these
transactions has been included within the income statement as an exceptional
item in the above table.
The expected costs of restructuring the Entertainment Wholesale business
following the acquisitions of THE and Bertrams, and the subsequent referral of
the Bertrams acquisition to the Competition Commission, have been treated as
exceptional items within the income statement.
On formation of 2entertain Limited, the Group agreed to guarantee the value of
the business transferred to 2entertain Limited for a period of three years to
September 2007. A provision of #5.2 million was recognised during 2005/06 in
respect of the second and third years. As the period of guarantee is now close
to completion an additional provision of #3.4 million has been provided for
within these interim accounts. This has been charged to the income statement as
an exceptional item, which is consistent with the treatment in 2005/06.
During the prior interim period a past service credit of #8.7 million (#6.1
million net of taxation) arising from the 'A-Day' legislation changes was
included in the prior year income statement as an exceptional item.
3. Taxation
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 2007 29 July 2006 3 February 2007
#m #m #m
Analysis of credit/(charge) in the period
Current tax
- Before exceptional items - - (1.4)
- Exceptional items - - -
Deferred tax
- Before exceptional items 20.9 22.7 1.6
- Exceptional items (1.3) (2.6) (2.6)
Total taxation 19.6 20.1 (2.4)
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year.
The estimated average annual tax rate used for this interim period is 31 per
cent (at 29 July 2006: 31 per cent) before exceptional items.
The Chancellor's Budget Statement of 21 March 2007 announced the reduction in
the rate of Corporation Tax from 30 per cent to 28 per cent with effect from 1
April 2008. It is estimated that this change will reduce the future benefit of
the deferred tax asset by approximately #1.5 million.
Included within the deferred tax asset of #8.3 million (at 29 July 2006: #38.1
million) is an amount of #19.6 million (at 29 July 2006: #20.1 million)
recognised on the losses incurred in the year to date. Due to the seasonality of
the business, the Directors believe this will reverse by the year end.
4. Earnings per Share
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 2007 29 July 2006 3 February 2007
Number of shares (millions)
Weighted average number of ordinary shares in issue 1,450.3 1,448.1 1,448.9
Effect of dilutive securities - 0.9 0.8
Diluted weighted average number of shares 1,450.3 1,449.0 1,449.7
For the two periods below where losses are reported, diluted earnings per share are equal to the basic
earnings per share.
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 2007 29 July 2006 3 February 2007
Per share Per share Per share
amount amount amount
Pence pence pence
#m #m #m
Continuing Operations
Basic EPS (44.2) (3.0) (44.8) (3.1) 13.5 0.9
Effect of dilutive securities - - - - - -
Diluted EPS (44.2) (3.0) (44.8) (3.1) 13.5 0.9
Adjusted earnings per share
Basic and diluted EPS (44.2) (3.0) (44.8) (3.1) 13.5 0.9
Fixed rental adjustment net of tax 2.7 0.2 3.7 0.2 7.4 0.5
Amortisation of intangible assets net of
tax 1.7 0.1 1.1 0.1 2.7 0.2
Exceptional items net of tax 0.4 - (6.1) (0.4) (6.1) (0.4)
Adjusted basic and diluted EPS (39.4) (2.7) (46.1) (3.2) 17.5 1.2
Basic
Basic earnings per share is calculated by dividing the profit/loss attributable
to equity shareholders of the Company by the weighted average number of ordinary
shares in issue during the year, excluding interests in own shares purchased by
the Woolworths Group Pension Trust (Trust) to meet obligations under Employee
Share Schemes which are accounted for as treasury shares.
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has only one category of dilutive
potential shares: share options. For the share options, a calculation is
undertaken to determine the number of shares that could have been acquired at
fair value (determined as the average annual market share price of the Company's
shares) based on the monetary value of the subscription rights attached to the
outstanding share options. The number of shares calculated is compared with the
number of shares that would have been issued assuming the exercise of the share
options.
Adjusted
Adjusted earnings per share excludes the fixed rental uplift adjustment, the
amortisation of underlying rights included within intangible assets and the
effect of exceptional items.
5. Dividends
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 2007 29 July 2006 3 February 2007
Pence Pence Pence
per share #m per share #m per share #m
Dividends proposed
Interim 0.43 6.2 0.43 6.2 0.43 6.2
Final - - - - 1.34 19.4
0.43 6.2 0.43 6.2 1.77 25.6
Dividends paid
Interim - - - - 0.43 6.2
Final 1.34 19.4 1.34 19.4 1.34 19.4
1.34 19.4 1.34 19.4 1.77 25.6
The interim dividend of 0.43 pence (2006: 0.43 pence) per share will be paid on
12 December 2007 to members registered at the close of business on 28 September
2007.
6. Statement of Changes in Shareholders' Equity
Attributable to equity holders of the company
Share Share Other Shares held Retained Total Minority Total
Capital Premium Reserves by Trust earnings Interest Equity
#m #m #m #m #m #m #m #m
At 28 January 2006 182.1 9.3 24.1 (3.1) 90.1 302.5 0.1 302.6
Loss for the period - - - - (44.8) (44.8) - (44.8)
Dividend - - - - (19.4) (19.4) - (19.4)
Issue of shares 0.1 - - - - 0.1 - 0.1
Cash flow hedges:
-Fair value losses net of tax - - (3.6) - - (3.6) - (3.6)
-Transfer of stock net of tax - - 0.7 - - 0.7 - 0.7
Actuarial gain arising on
defined benefit scheme net of
tax - - - - 14.1 14.1 - 14.1
Share-based payments - - - - 1.1 1.1 - 1.1
At 29 July 2006 182.2 9.3 21.2 (3.1) 41.1 250.7 0.1 250.8
At 3 February 2007 182.4 9.7 22.0 (3.2) 106.7 317.6 - 317.6
Loss for the period - - - - (44.2) (44.2) - (44.2)
Dividend - - - - (19.4) (19.4) - (19.4)
Issue of shares - - - - - - - -
Cash flow hedges:
-Fair value gains net of tax - - 1.8 - - 1.8 - 1.8
-Transfer of stock net of tax - - (2.2) - - (2.2) - (2.2)
Actuarial gain arising on
defined benefit scheme net of
tax - - - - 14.4 14.4 - 14.4
Deferred tax adjustment to 28%
on defined benefit scheme - - - - (1.4) (1.4) - (1.4)
Share-based payments - - - - 0.8 0.8 - 0.8
Transfer within reserves for
the disposal of freeholds - - (2.5) - 2.5 - - -
Net transaction in own shares
held by Trust - - - 0.6 - 0.6 - 0.6
At 4 August 2007 182.4 9.7 19.1 (2.6) 59.4 268.0 - 268.0
7. Net Funds Reconciliation
Group net funds/(debt) comprise the following:
Audited Unaudited
3 February Non 4 August 2007
2007 Cash flow cash items
#m #m #m #m
Cash at bank and in hand 28.4 (5.0) - 23.4
Bank loans and overdrafts (1.3) 1.3 - -
Cash and cash equivalents 27.1 (3.7) - 23.4
Finance leases (3.0) 0.9 - (2.1)
Bank borrowing (115.4) (98.7) (0.2) (214.3)
Collateralised borrowing (12.0) (13.0) - (25.0)
Net debt at end of the period (103.3) (114.5) (0.2) (218.0)
8. Retirement Benefit Obligations
The amounts recognised in the balance sheet are determined as follows:
Unaudited Unaudited Audited
4 August 2007 29 July 2006 3 February 2007
#m #m #m
Present value of scheme liabilities (386.0) (389.5) (400.0)
Fair value of scheme assets 322.4 287.2 316.0
Deficit (63.6) (102.3) (84.0)
The amounts recognised in the income statement are as follows:
Unaudited Unaudited Audited
26 weeks to 26 weeks to 53 weeks to
4 August 2007 29 July 3 February
#m 2006 2007
#m #m
Current service cost 8.6 9.7 22.1
Past service credit - (8.7) (8.7)
Expected return on scheme assets (10.9) (10.2) (21.1)
Interest cost 10.8 9.9 19.8
Total included in staff costs 8.5 0.7 12.1
The key financial assumptions applied in the actuarial review of the Woolworths
Group Pension Scheme have been reviewed in the preparation of these interim
accounts and amended where appropriate. The main financial assumption is the
real discount rate, ie the excess of the discount rate applied (6.0 per cent)
over the inflation rate applied (3.1 per cent). If this assumption increased/
decreased by 0.1 per cent, the pension obligation would decrease/increase by
approximately #9.7 million (before tax).
9. Contingent Liabilities
On the formation of 2entertain Limited, the Group agreed to guarantee the value
of the business transferred to 2entertain Limited for a period of three years to
September 2007. No liability was incurred in respect of the first year and a
provision of #5.2 million was recognised during 2005/06 in respect of the second
and third years. During 2006/07 the second year liability was calculated as #3.5
million and this was settled in April 2007. As the period of guarantee is now
close to completion the third year liability has been estimated to be #5.1
million, therefore this provision has been increased by #3.4 million within
these interim accounts.
10. Property, Plant and Equipment
Land and Fixtures, Total
buildings fittings and
equipment
#m #m #m
Cost
At 4 February 2007 19.1 693.4 712.5
Additions 5.1 8.6 13.7
Disposals (3.7) (6.5) (10.2)
At 4 August 2007 20.5 695.5 716.0
Depreciation
At 4 February 2007 (2.7) (398.1) (400.8)
Charge for period (0.1) (14.1) (14.2)
Disposals 0.5 3.7 4.2
At 4 August 2007 (2.3) (408.5) (410.8)
Net Book Amount
At 4 August 2007 18.2 287.0 305.2
Land and Fixtures, Total
buildings fittings and
equipment
#m #m #m
Cost
At 29 January 2006 7.3 651.8 659.1
Additions 7.3 32.1 39.4
Disposals - (15.5) (15.5)
At 29 July 2006 14.6 668.4 683.0
Depreciation
At 29 January 2006 (2.5) (382.4) (384.9)
Charge for period (0.1) (22.9) (23.0)
Disposals - 15.5 15.5
At 29 July 2006 (2.6) (389.8) (392.4)
Net Book Amount
At 29 July 2006 12.0 278.6 290.6
During the interim period the Group revised the useful economic lives of certain
computers and electronic equipment from five years to seven years. This revision
reduced the depreciation charge for the period by #5.9 million.
During the prior year ended 3 February 2007, the Group revised the useful
economic lives of certain store fixtures and fittings. It is estimated that this
revision reduced the depreciation charge for the current period by #2.9 million.
11. Borrowings
Unaudited Unaudited Audited
4 August 2007 29 July 2006 3 February 2007
#m #m #m
Current
Bank loans and overdrafts due within one year on
demand:
Unsecured:
Bank overdraft - 80.4 1.3
Senior Note - 98.1 -
Bank borrowings 214.3 - 115.4
Secured:
Obligations under finance leases 0.6 1.0 1.1
Collateralised borrowing 25.0 - 12.0
Total due within one year 239.9 179.5 129.8
Non-Current
Secured:
Obligations under finance leases 1.5 1.2 1.9
Total due after more than one year 1.5 1.2 1.9
Total Borrowings 241.4 180.7 131.7
Movement in borrowings is analysed as follows:
Opening amount 131.7 99.6 99.6
(Repayment)/utilisation of bank overdraft (1.3) 79.8 0.7
Repayment of senior notes - 0.3 (97.8)
Proceeds from borrowings 111.9 - 127.4
Financial lease principal (repayment)/addition (0.9) 1.0 1.8
Closing amount 241.4 180.7 131.7
12. Operating Loss
The following items have impacted the operating loss during the interim period:
Unaudited Unaudited
26 weeks to 26 weeks to
4 August 2007 29 July 2006
#m #m
Reduced charge relating to re-life of property, plant and equipment and
intangible assets 8.8 -
Property transactions* 7.3 2.9
* Represents an adjusted profit of #5.1 million and a credit of #2.2 million to
the fixed rental uplift under IFRS.
13. Ordinary Shares
Number Nominal Value
of shares
m #m
Authorised
Ordinary shares of 12.5 pence each at 29 July 2006, 3 February 2007 and 4
August 2007 1,600.0 200.0
Called up and fully paid
At 29 July 2006 1,457.3 182.2
Allotted under share option schemes 1.7 0.2
At 3 February 2007 1,459.0 182.4
Allotted under share option schemes - -
At 4 August 2007 1,459.0 182.4
This news release contains forward looking statements based on current
assumptions and forecasts made by Woolworths Group plc management. Various
known and unknown risks, uncertainties and other factors could lead to
substantial differences between the actual future results, financial situation,
development or performance of the Group and the estimates given here. The Group
accepts no obligation to continue to report or update these forward-looking
statements or adjust them to future events or developments. Further copies of
this announcement can be obtained from the office of the Group Finance Director
on 020 7706 5502 or downloaded from the Group website www.woolworthsgroupplc.com
- ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LVLLFDKBBBBX
Woolworths (LSE:WLW)
Historical Stock Chart
From Jul 2024 to Jul 2024
Woolworths (LSE:WLW)
Historical Stock Chart
From Jul 2023 to Jul 2024
