RNS Number:1040K
Woolworths Group PLC
23 March 2005
Woolworths Group Plc
Preliminary Results Announcement
23rd March 2005
for year ended 29 January 2005
Embargoed until 07.00hrs on 23 March 2005
Financial Highlights
* Total underlying Group sales up 4.5 per cent; like-for-like sales in
Woolworths Mainchain down 1.3 per cent
* Profit before taxation, exceptional items and amortisation of goodwill up
4.7 per cent to #73.1 million (2004: #69.8 million)
* Final Woolworths big W exceptional costs anticipated to be #35-40 million;
#60.9 million charged in 2004/5 followed by an exceptional credit of c #25
million in 2005/6
* Profit before tax after Woolworths big W exceptional #9.3 million (2004:
#66.7 million)
* Adjusted basic earnings per share up 2.9 per cent to 3.6 pence per share
* Strong cash generation with net funds at year-end of #108.7 million, up from
#52.9 million last year-end
* #72.0 million of capital expenditure, predominantly on store refurbishment
and systems
Operating Highlights
* Despite challenging second half, underlying Woolworths retail chain gross
margin up 40 basis points
* Strong performance from Entertainment Wholesale and Publishing businesses
including an encouraging Christmas debut for 2entertain
* Rollout of Kingstore till systems completed on time and below budget
* 48 stores refitted to 10/10, 2 new openings and a further 50 refits planned
for 2005/6
* Good progress made on reconfiguration of Woolworths big W store portfolio
Apax Offer
* Received indicative proposal at 58.2p including rights to future dividends
* Due diligence has commenced
* Deadline for announcement of offer 6 May 2005
Trevor Bish-Jones, Chief Executive of Woolworths Group Plc commented:
"Our entertainment wholesale and publishing businesses have had an excellent
year. The performance of Woolworths was more mixed, but we did achieve a 40
basis point improvement in the gross margin and have continued to deliver
operational improvements in the business. We have a much stronger product
offering and improving store environment for our customers. Despite the more
challenging consumer environment, we continue to see plenty of opportunity to
improve the performance of the business as we have done consistently since
demerger."
For further information contact:
Christopher Rogers, Group Finance Director 0207 479 5179
Nicole Lander, Head of Corporate Affairs 0207 706 5653
Kate Inverarity, Tulchan Communications 0207 353 4200
Overview of Financial Performance:
Profit before taxation, exceptional items and goodwill amortisation increased by
4.7 per cent to #73.1 million (2004: #69.8 million).
After charging an exceptional item of #60.9 million, profit before tax for the
year was #9.3 million (2004: #66.7 million).
In the 52 weeks ended 29 January 2005, total Group sales increased by 2.9 per
cent to #2.9 billion. Adjusting for the outsourcing of the cafe operation and
the creation of the 2entertain joint venture, underlying sales increased by 4.5
per cent.
The Group has continued to generate cash and at the year end net funds had risen
to #108.7 million (2004; #52.9 million).
Due to the indicative proposal from Apax, no final dividend has been declared.
In the event that no offer is forthcoming the Board expect to recommend a final
dividend for 2004/5.
2005 2004 % change
#m #m
Group sales 2,855.2 2,774.7 2.9
Profit before tax, exceptionals, and 73.1 69.8 4.7
goodwill amortisation
Exceptional Item (60.9) - -
Profit before tax 9.3 66.7 -
Adjusted basic earnings per share 3.6p 3.5p 2.9
(before exceptionals and goodwill
amortisation)
Earnings per share (basic) 0.1p 3.3p -
Net funds 108.7 52.9
Discussions with Apax
On Friday 18 March 2005 the Board announced that it had received a proposal from
Apax Partners Worldwide LLP ("Apax") for funds advised by Apax to acquire all of
the issued and to be issued share capital of Woolworths for 58.2p per share in
cash, including rights to any future dividends. This proposal is subject, inter
alia, to due diligence and final financing arrangements.
The Royal Bank of Scotland have expressed their confidence in providing a debt
package to support Apax's offer. Accordingly, the Board of Directors has agreed
that Apax can undertake due diligence with the intention that any formal offer,
if made, would be made no later than 6 May, as set out in the announcement made
on 18 March by the Panel on Takeovers and Mergers.
There can be no certainty that a firm offer will be made. A further announcement
will be made in due course.
Exercise of Share Options
Immediately following the release of these results, a number of senior
executives in the Group will be entitled to exercise options granted at the time
of demerger under the Woolworths Group Executive Share Options Scheme. The
Company has made arrangements for those individuals who wish to deal to do so
during the course of today only. No Group Director intends to exercise options
under these arrangements.
OPERATING REVIEW
RETAIL
Total Group retail like-for-like sales fell by 1.7 per cent with Woolworths
Mainchain down by 1.3 per cent, Woolworths big W down 3.5 per cent and MVC
decreasing by 4.8 per cent. As a result, operating profit from Retail
operations fell from #46.2 million to #40.7 million.
Woolworths Mainchain
Despite the disappointing second half to the year, much was accomplished in the
Mainchain during 2004 to improve the gross margin, strengthen the infrastructure
and develop the retail proposition. These initiatives remain fundamental to our
strategy and provide a firm foundation on which to build in 2005.
The underperformance of the Mainchain in October and November impacted our
overall result for the second half. The market dynamics worked against our
decision to move Christmas set up to before the October half-term. Space
allocated to Toys and Gifts was increased but delivered sales below that of the
displaced ranges, and the material weakness in the Toy market in particular
exacerbated the effect. Although performance in December and into early January
improved, with positive like-for-like sales of 0.9 per cent for the six weeks to
15 January 2005, this was insufficient to make up for the earlier performance.
On a positive note, despite the shortfall against sales targets, we were able to
keep stock under control, evidencing that the business is now much better
controlled than in prior years.
For the third successive year the underlying gross margin improved, growing by
40 basis points and building on the 90 basis points improvement over the last
two years. This was achieved through better sourcing, product development and
continuous improvement to the ranges.
We were particularly encouraged by the increased sales in Electrical,
Communications and Kids Dress Up which were categories in which we have focused
on delivering ranges to support our Kids & Celebrations strategy. Progress was
also made in Confectionery, Gifting and Events where we concentrated on
differentiating our offer from that of the competition. In Clothing we moved the
traded margin forward as we developed sources of supply that allowed us to react
in season. The Entertainment market continued to be highly competitive.
Shortages of games hardware coupled with a disappointing performance from new
DVD releases over the final quarter led to disappointing sales.
We continued to make progress in improving the operational efficiency of the
business, with the rollout of the Kingstore till system completed as planned in
October 2004, under budget and without disruption. These new tills not only
speed up transaction times for our customers but also give our store colleagues
better visibility of stock levels in store. This helped contribute to a further
increase in single sku in-store availability which rose 1.4 per cent during the
year to 93.3 per cent. Costs, both in store and at head office have also been
controlled tightly with the year-on-year increases running well below the rate
of inflation.
10/10
Our 10/10-store refurbishment programme continued with a total of 48 stores
refitted and a further two new stores opened. On average, relative to the
Mainchain, refitted stores have delivered 6 per cent sales growth in year one, 2
per cent in year two, coupled with an increase of 20 basis points in the gross
margin in the first year.
Although rollout uplifts are below those seen in the earlier refits, a detailed
analysis has helped us gain a better understanding of the performance drivers,
and these findings will be factored into our plans for the year ahead. Most
notably, we have found that the size of store and position relative to the local
market are important variables in driving the sales line, and the performance of
Clothing and Home are important factors in the margin performance.
In the year ahead we plan to be refitting a further 50 stores. The pre-opening
costs associated with the 48 refits in 2004/5 amounted to #3.3 million and are
expected to continue at this level in 2005/6.
Woolworths out-of-town
In March 2004, we announced that we would not continue to rollout Woolworths big
W. Instead, a site-by-site review of the estate would be undertaken to assess
the merits of either an outright disposal or reducing the size of the units to a
level that would be sustainable for a Woolworths out-of-town concept. The estate
was highly variable in terms of quality, size and retail planning consents.
As at the date of the accounts, five stores, all of which had food planning
consent, have been assigned and contracts on two further stores have been
exchanged and are awaiting landlord approval. A further two stores, where there
was excess space, have been either sublet or surrendered to the landlord. This
leaves 15 stores on which we anticipate making further progress over the coming
year. To date, assignment or surrender of leases has generated #35.5 million of
cash for the Group of which #9.0 million is recognised within the exceptional
item in 2004/5.
Looking forward, after further lease assignments, we anticipate that Woolworths
out-of-town will be trading from around 17 sites. In October 2004, stores at
Tamworth and Norwich were cut down and refitted to a 40,000 square feet
specification. Christmas trading was encouraging. A further two stores at Byker
and Bristol are being opened in the first quarter of 2005 and these four stores
will then be used to refine the proposition before any further investment is
made in our other sites. In the meantime, the remaining stores will be downsized
to around 40,000 square feet.
Multichannel Retailing
This Christmas for the first time we offered more than 4,000 additional products
through the Woolworths website, including over 2,800 Toys and Gifts,
dramatically broadening the pre-existing offer which was largely entertainment
based. It is our belief that in the long term serving customers through the
integration of our online offer with our extensive store network offers a good
growth opportunity, in particular in our smaller stores where a much broader
product offering will help to generate incremental sales. The internet-enabled
Kingstore till technology will play a key part in the development of our
evolving multichannel strategy.
MVC
The performance of MVC improved during the year. Despite the fall in
like-for-like sales of 4.8 per cent, losses narrowed substantially on the back
of a better margin and a tight control of costs. The Board however has
concluded that the investment required to reposition MVC is substantial and that
the preferred option is to divest the business. This will take place over the
coming months. In the near term the 14 worst performing stores will be closed
leaving a core of 67 stores.
ENTERTAINMENT WHOLESALE AND PUBLISHING
This has been a year of continued progress for our Entertainment Wholesale and
Publishing businesses, comprising Entertainment UK and our new joint venture
2entertain. Operating profits from this part of the Group rose 16.8 per cent to
#49.3 million before goodwill amortisation for the joint venture (2004: #42.2
million).
Entertainment UK (EUK)
Entertainment UK, our entertainment and books distribution business performed
robustly during the year. Overall sales increased by 10.0 per cent to #1.2
billion and within this sales to third parties increased by 38.4 per cent. This
increase was underpinned not only by the continued growth of the DVD market but
also by new business wins such as WH Smith's music and non-core video ranges and
the addition of book distribution for Tesco.
In addition, in August we announced the renewal of EUK's contract to supply
entertainment software to Tesco. Under the terms of this contract both parties
are committed to working together to improve supply chain efficiencies.
Undertaking any identified improvements is a condition of the contract
continuing for an initial three year term to March 2007.
The Entertainment market remains highly competitive, which has resulted in
pressure on the gross margin. However, this has been offset by continued
warehouse efficiencies where over the last two years cost per pick is down 7 per
cent and cost per return is down 22 per cent. This has been achieved through
investment in forecasting systems and tight control of overheads and as a
consequence, despite the gross margin pressure, EUK's profit has moved forwards.
Looking ahead, many opportunities exist to grow this business, with potential
for further supply contracts for other retailers; the Tesco books contract gives
EUK a substantial base on which to build its books capability and the business
continues to build its competency in digital downloading and online retailing.
2entertain
In September 2004 we completed the formation of a joint venture combining BBC
Worldwide's video business with the VCI music and video publishing companies to
create 2 entertain Limited. Woolworths Group has a 40 per cent interest in the
new business. In addition to VCI's existing rights, 2entertain has a first
option to acquire product from BBC productions.
The trading performance of the business first as VCI and then as 2entertain has
been strong. Over the key Christmas trading period sales were strong with the
joint venture having two of the top ten DVD releases with "Little Britain" and
"That Peter Kay Thing".
With the integration of the two entities going well, there is significant
opportunity for it to benefit from its new found scale and access to overseas
markets.
OUTLOOK
The retail trading environment is difficult, impacting both sales and margin.
February was affected by the cold weather and the phasing of the entertainment
release schedule. March has been relatively stronger but on non-comparative
Easter trading.
Our Entertainment Wholesale and Publishing businesses are trading in line with
our expectations.
We will update the market on the trading in the first quarter at the AGM on 7
June 2005.
Financial Review
Earnings Per Share and Dividend
Basic earnings per share, impacted by exceptional items, was 0.1 pence per share
compared with 3.3 pence per share in 2004. Adjusted earnings per share before
exceptional items and the amortisation of acquisition goodwill was 3.6 pence per
share compared to 3.5 pence per share in 2004.
In light of the proposal from Apax, the Directors are not recommending a final
dividend. In the event that an offer is not forthcoming, the Directors then
expect to recommend a dividend. The Company's Annual General Meeting is to be
held at 11:00am on 7 June 2005 at the Royal College of Physicians, 11 St Andrews
Place, Regent's Park, London NW1 4LE.
Exceptional items
In March 2004, the Group announced that Woolworths big W as traded from its
existing property portfolio did not represent a secure source of long term
profitability. As a result, a number of stores have been reconfigured or are in
the process of being sold. The operating exceptional item of #60.9 million
includes the cost of stock write downs, property impairments, redundancy, and
consultancy fees, partly offset by disposal proceeds. The restructuring of the
big W stores will continue throughout the current year and an exceptional credit
in the region of #25 million is expected in 2005/06. This will result in the
total net exceptional being in the range of #35-40 million.
Cashflow and Net Debt
At the year-end the Group had net funds of #108.7 million. Cash generation
across the Group remained healthy with a cash inflow from operating activities
of #162.2 million.
At the balance sheet date the Group had facilities comprising an undrawn,
uncancelled #150 million credit facility and, in issue, #100 million of 8.75 per
cent Senior Notes due in 2006.
The net interest charge has further decreased this year to #8.8 million from
#10.2 million in 2004. Net interest charges were covered 9.3 times before
exceptional costs and goodwill amortisation.
Subsequent to the balance sheet date, the Group took advantage of the favourable
lending market and refinanced. As a result the Group has added one bank to its
existing Club and amended the existing facilities to provide a new committed
revolving credit facility of #250 million over a five year term. Both pricing
and other terms reflect the further progress the Group has made since demerger.
Adoption of New Reporting Standards
The Group has adopted Urgent Issues Task Force, Abstract 38 (UITF38) 'Accounting
for ESOP Trusts'. As a result, shares in the Company held through an employee
share scheme which were previously reported as investments are now recorded as a
deduction from shareholders funds.
International Financial Reporting Standards
International Financial Reporting Standards (IFRS) become mandatory for the
consolidated financial statements reported by all EU Listed companies from 2005
onwards. The areas of greatest impact for the Group have been identified and
work is underway to ensure the required compliance with IFRS for the 2005/6
financial year. The impact assessment has identified that changes in accounting
treatment for property, goodwill, pensions and deferred tax may have greatest
impact on the Group.
The impact of IAS 39 'Financial Instructions; Recognition and Measurement' on
the Group's treasury operations is largely restricted to treatment of
instruments used to hedge its transacted foreign exchange exposure, its #100
million Bond, and the interest rate swap linked to this debt instrument. Group
Treasury anticipates that its foreign exchange hedging will qualify under the
new rules for hedge accounting treatment.
Taxation
The effective tax rate for the 52 weeks to 29 January 2005 before exceptional
items is 30.6 per cent (76.3 per cent including exceptional items). This
compares to an effective tax rate of 30.9 per cent for the prior year. Under
existing tax legislation, it is anticipated that the effective Group tax rate
will continue to move towards the standard corporation tax rate.
Acquisitions and Disposals
The Group purchased the remaining 50 per cent interest in Flogistics Limited (a
company which sells and distributes gift vouchers) from Kingfisher for #2 on 26
September 2004. There was no difference between the book value and the fair
value of the assets acquired. Accordingly, up to that date, Flogistics has been
accounted for as a joint venture and since that date as a subsidiary.
On 27 September 2004, Woolworths Group plc entered into a joint venture with BBC
Worldwide Limited to form 2entertain Limited. This transaction has been
accounted for in accordance with UITF 31 'Exchange of businesses or other non
monetary assets for an interest in a subsidiary, joint venture or associate'.
The net effect of this transaction was to dispose of a 60 per cent interest in
certain VCI Group trading entities in return for a 40 per cent interest in
2entertain Limited. Goodwill relating to the transaction of #52.1 million is
being amortised over 20 years and amortisation of #0.9 million has been charged
since completion.
Accounting for Pensions
Following a detailed review, the Group announced in April 2003 that it would
retain the Woolworths Group Pension Scheme (WGPS) final salary scheme, whilst
revised terms for the participation of new employees have been introduced,
existing members have been asked to increase contributions with effect from
April 2004 in order to retain their existing benefits.
Financial Reporting Standard 17 'Retirement Benefits' (FRS 17) was issued in
November 2000 to replace Statement of Standard Accounting Practice 24 '
Accounting for Pension Costs' (SSAP 24), and was initially supposed to be fully
effective for the accounting periods ending on or after 22 June 2003. However,
full implementation of FRS 17 has now been deferred, pending the review of
International Accounting Standard 19 'Employee Benefits'.
The Group has continued to account for pension costs under SSAP 24 although in
accordance with the transitional arrangements for FRS 17, certain additional
information is set out below. The Group has continued to contribute to the WGPS
at the rate of 13.5 per cent of pensionable pay. Under SSAP 24 the pension cost
for the year is #16.0 million (2004: #16.2 million), which is split into a
regular cost of #14.8 million (2004: #15.0 million) and a variation of #1.2
million (2004: #1.2 million).
The actuaries have assessed the Minimum Funding Requirement (MFR) level for the
Group at the end of the financial year and it remains above 100 per cent.
Impact of Financial Reporting
Standard 17 'Retirements Benefits'
The valuation of the WGPS as at 29 January 2005, as measured in accordance with
FRS 17, was a net pension deficit of #68.2 million (2004: #66.1 million) after
the benefit of potential deferred taxation at 30 per cent amounting to #29.3
million (2004: #28.4 million).
The increase in the deficit over the year is primarily attributable to asset
returns and membership movements within the scheme.
Had the Group charged pension costs to the profit and loss account on the FRS 17
basis, then the charge for the year would have been #18.4 million (2004:
#25.4million), compared to a SSAP 24 charge of #16.0 million (2004: #16.2
million).
Group Profit and Loss Account
For the 52 weeks to 29 January 2005
2005 2004
______________________________________________________________
Before
exceptional Exceptional
items items Total Total
#m #m #m #m
______________________________________________________________________________________________________
Turnover - Group and share of joint
ventures
Continuing operations 2,897.1 - 2,897.1 2,795.1
Less: share of joint venture's turnover (41.9) - (41.9) (20.4)
______________________________________________________________________________________________________
Group turnover 2,855.2 - 2,855.2 2,774.7
Cost of sales (2,099.2) (17.3) (2,116.5) (1,995.9)
______________________________________________________________________________________________________
Gross profit 756.0 (17.3) 738.7 778.8
Selling expenses (568.8) - (568.8) (578.8)
Administrative expenses (134.1) (43.6) (177.7) (138.4)
Other operating income 15.7 - 15.7 14.1
______________________________________________________________________________________________________
Group operating profit 68.8 (60.9) 7.9 75.7
______________________________________________________________________________________________________
Share of operating profit in joint
ventures after amortisation of goodwill of
#0.9 m 10.2 - 10.2 1.2
______________________________________________________________________________________________________
Profit before interest 79.0 (60.9) 18.1 76.9
Net interest payable (8.8) - (8.8) (10.2)
______________________________________________________________________________________________________
Profit on ordinary activities before 70.2 (60.9) 9.3 66.7
taxation
Taxation on profit on ordinary activities (21.5) 14.4 (7.1) (20.6)
______________________________________________________________________________________________________
Profit on ordinary activities after 48.7 (46.5) 2.2 46.1
taxation
Equity minority interest (0.2) - (0.2) (0.1)
______________________________________________________________________________________________________
Profit for the financial year 48.5 (46.5) 2.0 46.0
Dividends payable to shareholders (5.4) - (5.4) (21.2)
______________________________________________________________________________________________________
(Loss)/ retained profit for the financial
year 43.1 (46.5) (3.4) 24.8
______________________________________________________________________________________________________
Earnings per share (pence)
Basic 0.1 3.3
Diluted 0.1 3.3
Basic - adjusted* 3.6 3.5
Diluted - adjusted* 3.6 3.5
______________________________________________________________________________________________________
* Adjusted basic earnings per share is calculated before exceptional items and
amortisation of acquisition goodwill.
There is no material difference between the profit on ordinary activities before
taxation and the loss for the financial year and their historical cost
equivalents.
All results relate to continuing operations.
Group Statement of Total Recognised Gains and Losses
For the 52 weeks to 29 January 2005
_____________________________________________________________________________________________________
2005 2004
#m #m
_____________________________________________________________________________________________________
Profit for the financial year 2.0 46.0
Unrealised gain arising on subsidiary transferred in exchange
for share in joint venture 4.1 -
Total gains recognised 6.1 46.0
_____________________________________________________________________________________________________
Group Balance Sheet
At 29 January 2005 and 31 January 2004
___________________________________________________________________________________________________________
Restated
2005 2004
#m #m
___________________________________________________________________________________________________________
Fixed assets
Intangible fixed assets 12.0 58.7
Tangible fixed assets 312.1 323.7
Investments - associates 0.2 0.2
- joint ventures 56.9 -
___________________________________________________________________________________________________________
comprising - share of gross assets 49.2 12.0
- share of gross liabilities (43.5) (12.0)
- goodwill 51.2 -
___________________________________________________________________________________________________________
381.2 382.6
___________________________________________________________________________________________________________
Current assets
Stocks - finished goods 371.1 363.4
Debtors 148.8 166.3
Cash at bank and in hand 208.4 155.2
___________________________________________________________________________________________________________
728.3 684.9
___________________________________________________________________________________________________________
Creditors due within one year (499.1) (483.9)
___________________________________________________________________________________________________________
Net current assets 229.2 201.0
___________________________________________________________________________________________________________
Total assets less current liabilities 610.4 583.6
Creditors due after one year (99.6) (98.5)
Provisions for liabilities and charges (46.0) (27.8)
___________________________________________________________________________________________________________
Net assets 464.8 457.3
___________________________________________________________________________________________________________
Capital and reserves
Called up share capital 179.4 176.6
Share premium reserve 5.2 1.2
Demerger reserve 24.1 24.1
Revaluation reserve 3.0 3.1
Profit and loss account 253.1 252.1
___________________________________________________________________________________________________________
Equity shareholders' funds 464.8 457.1
Equity minority interests - 0.2
___________________________________________________________________________________________________________
464.8 457.3
___________________________________________________________________________________________________________
The prior year comparative has been restated following the adoption Urgent
Issues Task Force, Abstract 38 (UITF 38) 'Accounting for ESOP Trusts'.
Group Cash Flow Statement
For the 52 weeks to 29 January 2005
_________________________________________________________________________________________________________
Restated
2005 2004
#m #m #m #m
_________________________________________________________________________________________________________
Cash flows from operating activities
Net inflow from operating activities 162.2 113.0
_________________________________________________________________________________________________________
Dividends received from joint ventures 6.0 1.6
_________________________________________________________________________________________________________
Returns on investments and servicing of finance
Interest received 3.0 1.8
Debt issue costs - (1.0)
Interest paid (11.4) (11.6)
Net cash outflow from returns on investments and servicing
of financing (8.4) (10.8)
_________________________________________________________________________________________________________
Taxation paid (14.2) (16.8)
_________________________________________________________________________________________________________
Capital expenditure and financial investment
Cost associated with the formation of joint venture (1.7) -
Purchase of tangible fixed assets (72.0) (51.6)
Proceeds from sale of tangible fixed assets - 0.5
Net cash outflow for capital expenditure and financial
investment (73.7) (51.1)
_________________________________________________________________________________________________________
Acquisitions and disposals
Purchase of associate undertaking - (0.2)
Cash forgone with sale of subsidiary (0.4) -
Cash acquired with subsidiary acquisition - 0.2
Net cash outflow for acquisitions and disposals (0.4) -
_________________________________________________________________________________________________________
Equity dividends paid (21.5) (19.2)
_________________________________________________________________________________________________________
Cash inflow before use of
liquid resources and financing 50.0 16.7
_________________________________________________________________________________________________________
Management of liquid resources
Decrease in short-term deposits with banks 0.7 0.7
_________________________________________________________________________________________________________
Financing
Movement in short-term loan notes - (0.2)
Issue of share capital 6.8 1.6
Net movement of own shares held 0.2 (0.1)
Net cash inflow from financing 7.0 1.3
_________________________________________________________________________________________________________
Increase in cash in the period 57.7 18.7
_________________________________________________________________________________________________________
The prior year comparative has been restated following the adoption Urgent
Issues Task Force, Abstract 38 (UITF 38) 'Accounting for ESOP Trusts'.
Notes to the Accounts
1. Segmental Analysis
The Group's business is divided into Retail and Entertainment Wholesale and
Publishing segments. Woolworths, MVC, Streets Online and Flogistics are included
within the Retail segment with Entertainment UK, VCI and 2entertain making up
Entertainment Wholesale and Publishing.
Turnover
Group Turnover arises in the UK only and represents retail and wholesale
distribution sales and other services. Turnover excludes Value Added Tax. The
analysis of turnover by destination is not materially different to the analysis
of turnover by origin.
__________________________________________________________________________________________________________
2005 2004
Restated
#m #m
__________________________________________________________________________________________________________
(a) Turnover by origin
Retail
Group 2,262.3 2,284.9
Joint venture 12.1 20.4
__________________________________________________________________________________________________________
2,274.4 2,305.3
Entertainment Wholesale and publishing
Group 1,216.3 1,165.2
Joint venture 29.8 -
__________________________________________________________________________________________________________
1,246.1 1,165.2
Intergroup* (623.4) (675.4)
__________________________________________________________________________________________________________
Turnover - Group and share of joint ventures 2,897.1 2,795.1
__________________________________________________________________________________________________________
*Intergroup relates to trading between Group segments
Group share of joint venture turnover has been restated to reflect third party
sales only.
On 26 September 2004 the Group acquired the remaining shareholding in Flogistics
Limited. As a result Flogistics has been included as a subsidiary from that
date.
The Group entered into a joint venture with BBC Worldwide on 27 September 2004
to form 2entertain Limited. As a result a number of trading subsidiaries were
transferred into 2entertain Limited in which the Group holds a 40 per cent
share. These businesses reported sales up to 27 September 2004 of #49.1 million
(2004: #95.0 million).
1. Segmental Analysis (continued)
______________________________________________________________________________________________
2005 2004
______________________________________________________________________________________________
Before Operating
exceptional exceptional
Items items Total Total
#m #m #m #m
______________________________________________________________________________________________
(b) Profit on ordinary activities
before taxation
Retail
Group 40.7 (60.9) (20.2) 45.0
Joint venture - - - 1.2
______________________________________________________________________________________________
40.7 (60.9) (20.2) 46.2
Entertainment Wholesale and Publishing
Group 38.2 - 38.2 42.2
Joint venture 10.2 - 10.2 -
______________________________________________________________________________________________
48.4 - 48.4 42.2
Common costs (10.1) - (10.1) (11.5)
______________________________________________________________________________________________
Total operating profit 79.0 (60.9) 18.1 76.9
Net interest payable (8.8) - (8.8) (10.2)
______________________________________________________________________________________________
Profit on ordinary activities before 70.2 (60.9) 9.3 66.7
taxation
______________________________________________________________________________________________
Common costs before exceptional items relate to the Group's Corporate Centre,
amortisation of acquisition goodwill on subsidiaries of #2.0 million (2003: #3.1
million) and other consolidation adjustments.
__________________________________________________________________________________________________________
Restated
2005 2004
#m #m
__________________________________________________________________________________________________________
(c) Net assets
Retail 445.7 447.7
Entertainment Wholesale and Publishing* 196.0 170.2
Woolworths Group (176.9) (160.6)
__________________________________________________________________________________________________________
Total Group 464.8 457.3
__________________________________________________________________________________________________________
* The only net assets relating to joint ventures (#56.9 million) are shown
within the Entertainment Wholesale and Publishing segment (2004: #Nil)
2. Operating Exceptional Items
__________________________________________________________________________________________________________
2005 2004
#m #m
__________________________________________________________________________________________________________
Stock disposals and store clearance (17.3) -
Disposal of leases and reconfiguration of the out-of-town estate (37.6) -
Other (6.0) -
__________________________________________________________________________________________________________
Total operating exceptional items (60.9) -
__________________________________________________________________________________________________________
In March 2004, the Group announced that Woolworths big W as traded from its
existing portfolio did not represent a secure source of long-term profitability.
As a result a number of stores have been disposed of and in others excess space
has been vacated, cut down or are in the process of being sold and/or vacated.
Stock disposals and store clearance costs relate to the write-down of stock to
net realisable value.
Disposal of leases and reconfiguration of the out-of-town estate includes
provision for any void periods, surrender costs, asset impairments and other
transaction costs net of proceeds on disposal.
Other includes redundancy and refurbishment costs associated with the
out-of-town stores.
The tax effect of these operating exceptional costs in aggregate is a #14.4
million credit (2004: #Nil).
The cash effect of the operating exceptional items is a #3.1 million outflow in
this period (2004: #Nil).
3. Profit on Ordinary Activities Before Taxation
______________________________________________________________________________________________________
2005 2004
#m #m
______________________________________________________________________________________________________
Profit on ordinary activities before taxation is stated
after charging/(crediting):
Operating leases:
Land and buildings 149.9 147.4
Plant and equipment 5.5 5.6
Depreciation of tangible fixed assets:
Owned assets 54.4 56.4
Loss on the disposal of fixed assets 3.3 2.1
Net income from property portfolio transactions (4.0) (6.9)
Amortisation of acquisition goodwill - subsidiary 2.0 3.1
Amortisation of acquisition goodwill - joint venture 0.9 -
Amortisation of other intangible assets 0.8 1.9
Auditors' remuneration for audit:
To PricewaterhouseCoopers LLP 0.3 0.4
Auditors' remuneration for non-audit services 0.1 0.1
______________________________________________________________________________________________________
These numbers exclude the operating exceptional items which are disclosed in
note 2.
4. Taxation on profit on ordinary activities
(a) Analysis of charge in the year
_________________________________________________________________________________________________________
2005 2004
#m #m
_________________________________________________________________________________________________________
UK Corporation tax
Current tax
UK corporation tax charge on profits for the year (6.3) (22.7)
Share of joint venture's tax charge (3.7) (0.5)
Adjustments in respect of prior periods 1.8 3.6
_________________________________________________________________________________________________________
(10.2) (19.6)
Foreign tax charge on profits/(losses) for the year (0.6) (0.5)
_________________________________________________________________________________________________________
Total current tax (10.8) (20.1)
Current year deferred tax movement 3.7 (0.5)
_________________________________________________________________________________________________________
Total taxation (7.1) (20.6)
_________________________________________________________________________________________________________
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2004: higher) than the standard rate of
corporation tax in the UK (30 per cent). The differences are explained below:
_________________________________________________________________________________________________________
2005 2004
#m #m
_________________________________________________________________________________________________________
Profit on ordinary activities before tax 9.3 66.7
_________________________________________________________________________________________________________
Profit on ordinary activities multiplied by standard rate of corporation tax in (2.8) (20.0)
the UK of 30 per cent (2004: 30 per cent) to give expected charge
_________________________________________________________________________________________________________
Effects of: (6.9) (3.1)
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation and other timing differences (3.1) (1.1)
Utilisation of tax losses 0.2 0.5
Adjustment to tax charge in respect of previous periods 1.8 3.6
_________________________________________________________________________________________________________
Current tax charge for the year (10.8) (20.1)
_________________________________________________________________________________________________________
5. Dividends
_________________________________________________________________________________________________________
2005 2004
#m #m
_________________________________________________________________________________________________________
Interim paid - 0.39 pence per ordinary share (2004: 0.36 pence) 5.4 5.1
Final proposed - Nil pence per ordinary share (2004: 1.14 pence) - 16.1
_________________________________________________________________________________________________________
Total dividends 5.4 21.2
_________________________________________________________________________________________________________
Received/receivable by ESOP Trust* - 0.2
_________________________________________________________________________________________________________
In light of the proposal from Apax, the Directors are not recommending a
dividend. In the event that an offer is not forthcoming, the Directors then
expect to recommend a dividend.
*The right to receive dividends on these shares has been waived.
6. Earnings per Share
_____________________________________________________________________________________________________________
2005 2004
Restated
_____________________________________________________________________________________________________________
Weighted Weighted
average average
number of Per share number of Per share
Earnings shares amount Earnings shares amount
#m m pence #m m pence
_____________________________________________________________________________________________________________
Basic earnings per share
Earnings attributable to ordinary
shareholders 2.0 1,406.1 0.1 46.0 1,396.7 3.3
_____________________________________________________________________________________________________________
Effect of dilutive share options 19.3 15.2
_____________________________________________________________________________________________________________
Diluted earnings per share 2.0 1,425.4 0.1 46.0 1,411.9 3.3
_____________________________________________________________________________________________________________
Supplementary earnings per share
Basic earnings per share 2.0 1,406.1 0.1 46.0 1,396.7 3.3
Effect of exceptional items 60.9 - 4.3 - - -
Tax impact arising on exceptional items (14.4) - (1.0) - - -
_____________________________________________________________________________________________________________
Basic earnings per share before
exceptional items 48.5 1,406.1 3.4 46.0 1,396.7 3.3
Amortisation of acquisition goodwill 2.9 - 0.2 3.1 - 0.2
_____________________________________________________________________________________________________________
Basic - adjusted earnings per share 51.4 1,406.1 3.6 49.1 1,396.7 3.5
_____________________________________________________________________________________________________________
Diluted earnings per share 2.0 1,425.4 0.1 46.0 1,411.9 3.3
Effect of exceptional items 60.9 - 4.3 - - -
Tax impact arising on exceptional items (14.4) - (1.0) - - -
Diluted earnings per share before
exceptional items 48.5 1,425.4 3.4 46.0 1,411.9 3.3
Amortisation of acquisition goodwill 2.9 - 0.2 3.1 - 0.2
_____________________________________________________________________________________________________________
Diluted - adjusted earnings per share 51.4 1,425.4 3.6 49.1 1,411.9 3.5
_____________________________________________________________________________________________________________
The calculation of diluted earnings per share uses the weighted average number
of ordinary shares in issue adjusted by the effect of all dilutive potential
ordinary shares. The dilutive effect is calculated on the full exercise of all
share options where the exercise price is higher than the average daily share
price over the year. The calculation compares the difference between the
exercise price of exercisable share options, weighted for the period over which
they were outstanding, with the average daily share price over the period. The
prior year numbers have been restated to reflect this calculation.
7. Consolidated Cash Flow
a) Reconciliation of Operating Profit to Net Cash Flow from Operating Activities
___________________________________________________________________________________________________________
2005 2004
#m #m
___________________________________________________________________________________________________________
Group operating profit 7.9 75.7
Depreciation, amortisation and impairment 82.6 61.8
Increase in stocks (9.4) (5.9)
Increase in debtors (6.0) (19.2)
Increase/(decrease) in creditors 83.8 (1.5)
Loss on disposal of fixed assets 3.3 2.1
___________________________________________________________________________________________________________
Net cash inflow from operating activities 162.2 113.0
___________________________________________________________________________________________________________
b) Analysis of Changes in Net Funds
___________________________________________________________________________________________________________
At At
31 January Non cash 29 January
2004 Cashflow Items 2005
#m #m #m #m
___________________________________________________________________________________________________________
Cash and current bank accounts 153.8 53.9 - 207.7
Bank overdraft (3.8) 3.8 - -
___________________________________________________________________________________________________________
Cash and current back accounts (net of overdraft) 150.0 57.7 - 207.7
Deposit with banks 1.4 (0.7) - 0.7
Finance leases due within one year - - (0.1) (0.1)
___________________________________________________________________________________________________________
Cashflow before use of liquid resources and financing 151.4 57.0 (0.1) 208.3
Finance leases due after more than one year - - (0.5) (0.5)
Senior Notes (98.5) - (0.6) (99.1)
___________________________________________________________________________________________________________
Net funds at the end of the year 52.9 57.0 (1.2) 108.7
___________________________________________________________________________________________________________
c) Reconciliation of Net Cash Flow to Movement in Net Funds
___________________________________________________________________________________________________________
2005
#m
___________________________________________________________________________________________________________
Increase in cash in the year 57.7
Movement in deposits with banks (0.7)
Movement in finance lease obligations (0.6)
Senior Notes (0.6)
___________________________________________________________________________________________________________
Change in net funds in the year 55.8
Net funds at the start of the year 52.9
___________________________________________________________________________________________________________
Net funds at the end of the year 108.7
___________________________________________________________________________________________________________
8. Reconciliation of Movement in Shareholders' Funds
___________________________________________________________________________________________________________
2005 2004
#m #m
___________________________________________________________________________________________________________
Profit for the financial year 2.0 46.0
Dividends (5.4) (21.2)
___________________________________________________________________________________________________________
(Loss)/retained profit for the financial year (3.4) 24.8
Issue of share capital 6.8 1.6
Unrealised gain arising on formation of joint venture 4.1 -
Net movement of own shares 0.2 (0.1)
Opening equity shareholders' funds as previously reported 461.4 435.0
Prior year adjustment (4.3) (4.2)
Opening equity shareholders' funds as restated 457.1 430.8
___________________________________________________________________________________________________________
Closing equity shareholders' funds as restated 464.8 457.1
___________________________________________________________________________________________________________
________________________________________________________________________________
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 Corporate Affairs department on 020
7706 5689 or downloaded from the Group website www.woolworthsgroupplc.com
The enclosed financial information is derived from the full Group Financial
Statements for the 52 weeks ended 31 January 2004 and does not constitute the
full statutory statements of Woolworths Group plc within the meaning of section
240 of the Companies Act 1985 (as amended). The Group Financial Statements, on
which the independent auditors have given an unqualified report, which does not
contain a statement under section 237 (2) or (3) of the Companies Act 1985, will
be delivered to the Registrar of Companies in due course and posted to
shareholders in April 2004. Following this posting, copies will be available
from the Company Secretary, Woolworths Group plc, Woolworth House, 242-246
Marylebone Road, London NW1 6JL and will be available on the Group website
www.woolworthsgroupplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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