RNS Number:8643W
Woolworths Group PLC
24 March 2004
Woolworths Group plc
Preliminary Results Announcement
24th March 2004
for the year ended 31 January 2004
Embargoed until 07.00 hrs on 24 March 2004
Financial Highlights
* Profit before taxation, exceptional items and amortisation of goodwill up
32.2% to #69.8m (2003: #52.8m)
* Profit before taxation up 75.5% to #66.7m (2003: #38.0m)
* Adjusted basic earnings per share up 34.6% to 3.5 pence per share (Basic
earnings per share up 83.3% to 3.3 pence per share)
* Proposed final dividend up 14% to 1.14 pence per share
* Full year dividend of 1.5 pence per share, an increase of 13.2%
* Net funds of #52.9m at year end, up #17.7m from last year end
Operating Highlights
* Underlying Woolworths retail chain gross margin up 40 basis points
* Market share increases in Toys, Entertainment and Clothing
* #25m investment in the Mainchain in 2004/5 - 50 Woolworths stores to be
reformatted following successful performance of "10/10" trial stores
* Existing Woolworths big W stores to be downsized to generate cash, improve
returns, maintain out-of-town presence and create property opportunities
Gerald Corbett, Chairman of Woolworths Group plc, commented:
"The Woolworths recovery is gaining momentum, with underlying profits up 32%.
Following this year of solid progress, the investment programme announced today
builds on the operating improvements achieved and heralds the prospect of
further growth for the Woolworths Group".
Trevor Bish-Jones, Chief Executive of WoolworthsGroup plc, commented:
"The combination of solid sales growth, further margin improvement and continued
rigorous removal of excess costs, resulted in a second year of strong profit
growth. Our customers are responding well to improvements in our store
standards, and in our products and the continued focus on being famous for "Kids
and Celebrations". By investing further in our stores we aim to deliver
continued growth in the years ahead."
For further information contact:
Christopher Rogers, 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
32.2 per cent to #69.8 million (2003: #52.8 million). Profit before tax, (there
being no exceptional items in 2004), increased by 75.5 per centto #66.7 million
(2003: #38.0 million).
In the 52 weeks ended 31 January 2004, total Group sales increased by 3.1 per
cent to #2.8 billion. 2003 sales have been restated to reflect the introduction
of FRS 5 Application note G, which has been adopted this year. Sales have also
been impacted by the outsourcing of our in-store cafe operation from October
2003. Stripping out these changes, the underlying total Group sales growth was
4.3 per cent. Within this, underlying Retail sales grew by 0.9 per cent and
sales in the Entertainment Wholesale and Publishing businesses grew by 23.4 per
cent.
Total Group like-for-like sales increased by 0.6 per cent, with Woolworths
Mainchain increasing by 1.0 per cent, Woolworths big W increasing by 2.1 per
cent and MVC decreasing by 7.2 per cent.
The Group has continued to generate cash and at the year-end net funds had risen
to #52.9 million (2003: #35.2 million).
2004 2003 % Change
#m #m
Group sales 2,774.7 2,690.5* 3.1
Profit beforetax, exceptionals and goodwill 69.8 52.8 32.2
amortisation
Profit before tax and exceptionals 66.7 49.8 33.9
Profit before tax 66.7 38.0 75.5
Adjusted basic earnings per share 3.5p 2.6p 34.6
(before exceptionals and goodwill amortisation)
Earnings per share (basic) 3.3p 1.8p 83.3
Full year dividend per share 1.5p 1.325p 13.2
Net funds 52.9 35.2 50.3
* 2003 has been restated to adjust for the impact of FRS 5 Application note G,
which has been adopted in 2004.
Operating Review
Retail
Woolworths
Total Woolworths sales grew by 0.3 per cent to #2,143.5 million. Stripping out
the impact of the adoption of FRS 5 Application note G and the cafe outsourcing,
total underlying Woolworths sales increased by 1.7 per cent. Total Woolworths
like-for-like sales were up 1.1 per cent; with the Mainchain up 1.0 per cent and
Woolworths big W up 2.1 per cent.
Underlying gross margins improved by 40 basis points with all product areas
seeing improvement, with the exception of Entertainment, where we competed
particularly aggressively and gained market share.
Further reductions in shrinkage (stock losses) were achieved, accounting for 10
basis points of the margin improvement; head office costs were managed down and
in-store disciplines were improved.
Recovery Plan
Underpinning these results has been the rigorous implementation of the
Woolworths Recovery Plan, which comprises four key elements: simplifying the
business, strengthening the infrastructure, driving margin through product
development anddeveloping clearer propositions across all our retail portfolio.
Good progress continues to be made across all these areas and we are now
starting to see some of the medium and longer-term benefits.
Simplifying the business
In 2002/3 the Group undertook a number of structural changes to streamline the
organisation, with shorter reporting lines and clearer accountabilities.
This process continued through 2003/4, with a further 8 per cent reduction of
head office roles, a reorganisation of field management and the closer
integration of MVC with the Woolworths Entertainment business. Continuing this
process, in early 2004 Woolworths moved to a smaller, more focused executive
team to improve accountability and facilitate faster decision making.
Strengthening the infrastructure
The transition towards common systems across the chain is the key element of our
infrastructure development. During the year, investment in Woolworths' IT
systems totalled #14.7 million.
Investment in buying and replenishment systems is nearing completion, with a
majority of the purchase orders and store deliveries now controlled by the new
systems. This contributed to a 1.7 per cent improvement in single sku (stock
keeping unit) in-store availability over the year.
The rollout of the Kingstore till system continues and is now installed in 320
stores, accounting for 63 per cent of Woolworths' total space. Faster
transaction times reduce store costs and improve customer service and the item
specific information provided by Kingstore supports improvements to on-shelf
availability and shrinkage rates. As a result, we have decided to accelerate the
rollout of Kingstore to all remaining Woolworths stores by Christmas 2004. This
willrequire a capital investment of #19 million, advancing #9 million planned
for 2005/06.
As previously reported, our supply chain review identified the need to optimise
our warehouse network. As the need arises, further warehousing space will be
sourced to enhance the efficiency of movement of goods from our domestic and
international suppliers through to our stores. Our distribution centres have
moved to a 24 hour 7 day a week working pattern and we have also successfully
introduced out of hours delivery. Both of these measures have increased
flexibility and fleet utilisation.
Driving margin through product development
Within the Woolworths retail chain, underlying gross margin grew by 40 basis
points, building on the increase of 50basis points achieved last year. We grew
margin rate across all product categories except Entertainment, where we took a
deliberately aggressive promotional strategy to enhance Group profitability.
Market share was gained across the majority of the business.
The Woolworths product and promotional offer has continued to improve throughout
the year, providing our customers with the products they want, at excellent
value.
Within Toys we grew market share by a further 0.6 per cent, building onthe 1.5
per cent growth reported last year. Our exclusive Chad Valley products continue
to be a key driver of this success, combined with our ability to source "hot"
products.
Similarly in Clothing, the continued development of our exclusive Ladybird brand
has helped us build margin and market share. Improvements to our Clothing supply
chain enabled us to react to in-season sales trends, resulting in more effective
mark-down and increased profitability. The year also saw the successful launch
of our own brand STUK boyswear.
We saw a market share reduction in Confectionery. Establishing a differentiated
offer in a saturated, promotion-driven market has been a major undertaking and
we are encouraged by the early results of some of our product development. This
includes own brand ranges of bar confectionery and innovative Pic 'n' Mix cups
where the customer pays a fixed price for a particular cup size.
In Home (excluding Heath and Beauty), we have seen further margin growth onthe
back of improvements to product and range architecture. Our ranges increasingly
offer the more fashionable, aspirational product demanded by our core customer,
whilst retaining an edited range of home essentials.
In Entertainment, a more aggressive promotional stance coupled with an increased
space allocation to DVD has helped deliver a strong performance. Sales grew
strongly and market share increased.
A second consecutive year of underlying gross margin improvement in the
Woolworthsretail chain is an endorsement of the strategies in place to deliver
ongoing improvements. At the same time, great care has been taken to safeguard
the Woolworths 'value' perception, which is very important to our core customer
base.
Progress on product development has been supported by improvements to our
in-store shopping experience. During the year "Service into Sales" was launched,
a programme focussing on improving on-shelf availability, reducing queuing times
and improving the interaction with customers. Over the key Christmas period, an
additional 6,500 colleagues were recruited, 500 more than the previous year, and
an extra 700 mobile tills were used. These measures produced positive results
which included reducing queuing timesby 4.0 per cent.
Developing clearer propositions
Over the past two years a new strategic positioning for Woolworths has been
established, aimed at making Woolworths famous for "Kids and Celebrations". We
continue to develop product and allocate space to support this strategy.
Investment in new formats
Our trial stores have also reflected the strategy of "Kids and Celebrations". By
the end of autumn 2003, a total of ten "10/10" trial stores had been refitted.
For the period since refurbishment through to the end of January 2004 these
stores had an average sales uplift of 10 per cent against their control groups
and increased gross margin by over 100 basis points compared to the Mainchain.
Two of the stores which have been trading for over a year are showing second
year growth.
These good results validate the "Kids and Celebrations" strategy and provide the
basis for future investment. The refit costs are now at a level which, when
combined with the performance uplifts to date, yield an acceptable return on
capital and appropriate payback period. We therefore plan to accelerate the
refit programme so that long term growth is brought forward through a further 50
store refits during 2004, requiring a capital investment of #25 million. Due to
asset write offs and pre-opening costs, this will have a drag on earnings of
#4-5 million in 2004.
The combination of the accelerated investment in Kingstore, plus the investment
in the store refurbishment programme willincrease capital expenditure this year
to circa #80 million. This will be funded from internal cash generation.
Review of Woolworths big W
Like-for-like sales from the 21 existing Woolworths big W stores grew by 2.1 per
cent and underlying margins improved by 0.5 per cent. This was an insufficient
improvement to bring the format into profitability. The Woolworths big W concept
was developed when Woolworths was part of Kingfisher and the absence of the
Kingfisher supply chain in DIY, electrical goods and health and beauty products
has weakened the proposition. Whilst there remains scope to continue to improve
performance, we are unlikely to earn a satisfactory return to justify further
rollout of the existing format.
Out-of-town trading is an exciting sector of British retailing and provides a
good opportunity for the development of the Woolworths brand. The existing
Woolworths big W stores prove that there is a substantial customer base for the
Woolworths brand out-of-town. We already have successful, profitable models of
large-scale retailing in the biggest stores in the Woolworths Mainchain and in
some of the more successful big W stores. Our analysis of these stores has
demonstrated that a clear opportunity existsfor Woolworths to trade out-of-town
in stores ranging from 35 - 50,000 sq ft. We will therefore cease opening
stores of 70 - 80,000 sq ft and look, over the coming year, to downsize our
existing Woolworths big W stores. These stores, which will be branded
Woolworths, will focus on products which support our "Kids and Celebrations"
proposition such as baby shop, kids rooms and party shop and will no longer
include less profitable ranges such as adult clothing, toiletries and petcare.
This approach will enable us to maintain a presence out-of-town whilst improving
returns, generating cash and unlocking shareholder value.
MVC
MVC's performance has been disappointing, recording a decline in like-for-like
sales of 7.2 per cent. During the year the business underwent a significant
amount of change including the closure of its Head Office in Harrow; re-spacing
of the stores towards DVD's and games and the relaunch of the MVC membership
card to the "More" card.
The disruption caused by these changes was greater than anticipated, but we
believe that this is now firmly behind us. There is now increased management
focus on the business and although the specialist sector will continue to be
pressurised, we are more confident about the outlook for MVC in 2004/5.
Entertainment Wholesale and Publishing
This has been another year of continued success for our Entertainment Wholesale
and Publishing businesses, comprising Entertainment UK and VCI.
Entertainment UK
Entertainment UK (EUK) had a strong year, increasing third party sales by an
overall 26.8 per cent. Its total sales, including intergroup sales, exceeded #1
billion for the first time. A key driver of this was the strong market growth of
DVDs. However, margin pressure continued and although this was to some extent
offset by improvements in distribution efficiency, unit growth coupled with the
requirement to invest more in customer service resulted in operating margins
falling back.
During the year, due to two lease expiries, a new returns distribution facility
was opened. This was achieved to plan and under budget, with no degradation to
customer service levels.
EUK continued to build its competency in digital downloading and together with
Streets Online has been working to build a stable and secure platform from which
customers can access music online. The download market is in its formative
stages of development and it is anticipated that during 2004 further digital
download services will be launched.
Negotiations with Tesco on a new contract continue and we will update the market
when they are concluded. In the meantime, the parties are continuing to operate
under the existing arrangements.
VCI Group
VCI had a strong year with sales from continuing operations increasing by 15.8
per cent to #63.5 million. There were two key drivers boosting the video
business. Firstly, the change in mix from VHS to DVD was again favourable and,
secondly, the release schedule derived from its core contracts included some
very strong titles, such as "Peter Kay's Phoenix Nights Series 2", "Bo'Selecta!"
and "Cold Feet".
In the audio division, Demon Music Group also performed well, taking a 22.5 per
cent share of the budget music market.
Banana Split Productions (a company in which the Group acquired a controlling
interest in July 2002) performed well during the year, increasing its customer
base and exceeding the targets set at the time of acquisition. The business
focuses on the production of pre-recorded videos, feature film trailers,
television programming and advertisements.
Outlook
Trading in the new financial year across the whole business has begun in line
with our plans. We will issue our 1st Quarter trading statement at the AGM on
27th May 2004.
Financial Review
Earnings Per Share and Dividend
Basic earnings per share was 3.3 pence per share compared with 1.8 pence per
share in 2003. Adjusted basic earnings per share before exceptional items and
the amortisation of acquisition goodwill was 3.5 pence per share compared to 2.6
pence per share in 2003.
The Board has proposed a final dividend of 1.14 pence per share making a total
dividend for the year of 1.5 pence per share, an increase of 13.2 per cent on
the previous year. The dividend is covered 2.3 times by earnings before
goodwill amortisation. This final dividend will be paid on 24 June 2004, to
shareholders on the register at close of business on 2 April 2004, subject to
the approval of shareholders at the Company's Annual General Meeting. This is
to be held at 11:00am on Thursday 27 May 2004 at the Royal College of
Physicians, 11 St Andrews Place, Regent's Park, London NW1 4LE.
Cashflow and Net Funds
At the year-end the Group had net funds of #52.9 million. Cash generation
across the Group remained healthy with a cash inflow from operating activities
of #113.0 million, generated predominantly by the profit for the year.
Working capital management continues to be a priority. Year-end stock was #5.9
million higher than the previous year due to a conscious effort to improve
availability during January and at the start of the new financial year.
During the year the Group took the opportunity to re-finance its core committed
revolving credit facility and in the process rationalised its banking group to a
smaller club of close relationships. A new committed revolving credit facility
of #150 million is now in place with #125 million being a 5 year term and the
remainder for 3 years. Both pricing and other terms reflect the progress the
Group has made since demerger.
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 #10.2 million from
#10.6 million in 2003. Net interest charges were covered 7.8 times before
exceptional costs and goodwill amortisation.
Segmental Analysis
The Group changed the basis of its segmental reporting during the year. Two
segments, Retail and Entertainment Wholesale and Publishing have been introduced
to provide a better understanding of the Group's business and as a result, a
better indication of past and future performance. Accordingly, Woolworths, MVC
and Streets Online are included within the Retail segment, with Entertainment UK
and VCI making up Entertainment Wholesale and Publishing.
Adoption of New Reporting Standards
The Group has adopted the Amendment to Financial Reporting Standard 5 :
'Reporting the Substance of Transactions' - Application note G - Revenue
Recognition'. The main impacts of this amendment for the Group are the
derecognition of expected sales returns which had previously been provided for
on a net basis, and the removal of gross agency sales and their replacement by
net commission receivable. A table showing the impact of these can be found in
note 1 to the accounts.
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.
Taxation
The effective tax rate for the 52 weeks to 31 January 2004 is 30.9 per cent.
This compares to an effective tax rate of 33.4 per cent for the prior year, and
an effective tax rate of 33.5 per cent for the six months to 2 August 2003 (six
months to 3 August 2002: 36.1 per cent).
Accounting for Pensions
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 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, therefore, has continued to account for pension costs under SSAP 24
and in accordance with the transitional arrangements for FRS 17.
The Group has continued to contribute to its defined benefits scheme at the rate
of 13.5 per cent of pensionable pay. Under SSAP 24 the pension cost for the
year is #16.2 million (2003: #17.0 million), which is split into a regular cost
of #15.0 million (2003: #15.7 million) and a variation of #1.2 million (2003:
#1.3 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 defined benefits scheme at 31 January 2004, as measured in
accordance with FRS 17, was a net pension deficit of #66.1 million (2003: #94.4
million) after the benefit of potential deferred taxation at 30 per cent
amounting to #28.4 million (2003: #40.4 million).
The decrease 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 #25.4 million (2003: #15.2m,
10 months), compared to a SSAP 24 charge of #16.2 million (2003: #14.2 million,
10 months).
Group Profit and Loss Account
For the 52 weeks to 31 January 2004
Restated
2004 2003
Before
exceptional Exceptional
Total items items Total
#m #m #m #m
Turnover - Group and share of joint ventures
Continuing operations 2,816.3 2,740.2 - 2,740.2
Less: share of joint venture's turnover (41.6) (49.7) - (49.7)
Group turnover 2,774.7 2,690.5 -2,690.5
Cost of sales (1,995.9) (1,934.2) - (1,934.2)
Gross profit 778.8 756.3 - 756.3
Selling expenses (578.8) (565.0) - (565.0)
Administrative expenses (138.4) (140.4) (6.3) (146.7)
Other operating income 14.1 11.1 - 11.1
Group operating profit 75.7 62.0 (6.3) 55.7
Analysed as:
Continuing operations 75.7 62.0 (6.3) 55.7
Share of operating profit/(loss) in joint
ventures 1.2 (1.6) - (1.6)
Operating profit including joint ventures 76.9 60.4 (6.3) 54.1
Non-operating exceptional items - - (5.5) (5.5)
Profit before interest 76.9 60.4 (11.8) 48.6
Net interest payable (10.2) (10.6) - (10.6)
Profit on ordinary activities before taxation 66.7 49.8 (11.8) 38.0
Taxation on profit on ordinary activities (20.6) (15.9) 3.2 (12.7)
Profit on ordinary activities after taxation 46.1 33.9 (8.6) 25.3
Equity minority interest (0.1) (0.1) - (0.1)
Profit for the financial year 46.0 33.8 (8.6) 25.2
Dividends payable to shareholders (21.2) (18.7) - (18.7)
Retained profit for the financial year 24.8 15.1 (8.6) 6.5
Earnings per share (pence)
Basic 3.3 1.8
Diluted 3.1 1.7
Basic - adjusted* 3.5 2.6
Diluted - adjusted* 3.3 2.5
* Adjusted basic earnings per share is calculated before exceptional items and
amortisation of acquisition goodwill.
There were no exceptional items during the year.
There is no material difference between the profit on ordinary activities before
taxation and the retained profit for the financial year and their historical
cost equivalents.
The Group has no recognised gains and losses other than the gains and losses
above and, therefore, no separate statement of total recognised gains and losses
has been included.
The prior year comparative has been restated following the adoption of Financial
Reporting Standard 5, Application note G on 'Reporting the Substance of
Transactions'.
Group Balance Sheet
At 31 January 2004 and 1 February 2003
Restated
2004 2003
#m #m
Fixed assets
Intangible assets 58.7 63.7
Tangible assets 323.7 332.6
Investments - own shares 4.3 4.2
- associates 0.2 -
- joint ventures - share of gross assets 12.0 13.6
- share of gross liabilities (12.0) (13.4)
386.9 400.7
Current assets
Stocks 363.4 357.5
Debtors 166.3 146.3
Cash at bank and in hand 155.2 133.8
684.9 637.6
Creditors due within one year (483.9) (477.7)
Net current assets 201.0 159.9
Total assets less current liabilities 587.9 560.6
Creditors due after one year (98.5) (98.0)
Provisions for liabilities and charges (27.8) (27.3)
Net assets 461.6 435.3
Capital and reserves
Called up share capital 176.6 176.0
Share premium reserve 1.2 0.2
Demerger reserve 24.1 24.1
Revaluation reserve 3.1 3.3
Profit and loss account 256.4 231.4
Equity shareholders' funds 461.4 435.0
Equity minority interests 0.2 0.3
461.6 435.3
The prior year Group comparative has been restated following the adoption of
Financial Reporting Standard 5, Application note G on 'Reporting the Substance
of Transactions'.
Group Cash Flow Statement
For the 52 weeks to 31 January 2004
2004 2003
#m #m #m #m
Cash flows from operating activities
Net inflow from operating activities 113.0 76.3
Dividends received from joint ventures 1.6 4.1
Returns on investments and servicing of finance
Interest received 1.8 1.9
Debt issue costs (1.0) -
Interest paid (11.6) (12.3)
Net cash outflow from returns on investments and servicing
of financing (10.8) (10.4)
Taxation paid (16.8) (2.9)
Capital expenditure and financial investment
Purchase of intangible fixed assets - (0.1)
Purchase of tangible fixed assets (51.6) (41.9)
Net purchase of own shares (0.1) (1.9)
Proceeds from sale of tangible fixed assets 0.5 0.5
Net cash outflow for capital expenditure and financial
investment (51.2) (43.4)
Acquisitions and disposals
Purchase of associate undertaking (0.2) -
Purchase of subsidiary undertaking - (2.5)
Cash acquired with subsidiary acquisition 0.2 0.4
Net cash outflow for acquisitions and disposals - (2.1)
Equity dividends paid (19.2) (17.3)
Cash inflow before use of
liquid resources and financing 16.6 4.3
Management ofliquid resources
Decrease/(increase) in short-term deposits with banks 0.7 (2.1)
Financing
Movement in short-term loan notes (0.2) (0.3)
Issue of share capital1.6 0.3
Net cash inflow from financing 1.4 -
Increase in cash in the period 18.7 2.2
Notes to the Accounts
1. Segmental Analysis
The Group changed the basis of its segmental reporting during the year. Retail
and Entertainment Wholesale and Publishing segments have been introduced to
provide a better understanding of the Group's business and as a result a better
indication of past and future performance. Accordingly, Woolworths, MVC and
Streets Online are included within the Retail segment with Entertainment UK and
VCI making up Entertainment Wholesale and Publishing.
Turnover
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.
Restated
2004 2003
#m #m
(a) Turnover by origin - continuing operations
Retail 2,284.9 2,293.7
Entertainment Wholesale and publishing 1,165.2 1,055.4
Intergroup* (675.4) (658.6)
Group Turnover 2,774.7 2,690.5
*Intergroup turnover wholly relates to Entertainment Wholesale and Publishing
VCI plc, one of the Group's principal subsidiaries, sold the trade and assets of
its distribution business, Disc Distribution Limited, on 31 May 2002. This
business reported sales for the five months to 31 May 2002 of #17.5 million and
an operating loss of #2.5 million.
In October 2003 Woolworths outsourced its in-store cafe operation. In accordance
with FRS 5, gross sales are shown up to the date of transfer and the commission
earned since that date is included within other operating income.
The introduction of electronic top-up for mobile phones has progressively
replaced the use of phone vouchers in the past year. Woolworths acts as
principal in the selling of mobile phone card vouchers and consequently includes
gross sales as turnover. However, where Woolworths provides a facility for
electronic top-up, it acts as an agent and commissions arising are shown as
other operating income.
The Group has adopted the Amendment to Financial Reporting Standard 5 (FRS 5),
Application note G on 'Reporting the Substance of Transactions', which was
issued in November 2003. The main impact of changes arising from the change in
accounting policy are as follows:
* The removal of agency sales from the reported turnover.
* The derecognition of expected sales returns for sales made on a sale or
return basis which had previously been provided for on a net basis.
* Turnover is now stated at a fair value of the right to consideration which
is net of all discounts. Customer rebates and staff discounts are now
treated as a reduction in turnover rather than as a cost of sale.
2004 2003
#m #m
Turnover as previously disclosed 2,717.4
Restated for FRS 5 (26.9)
Group Turnover 2,774.7 2,690.5
1. Segmental Analysis continued
The adoption of FRS 5 has resulted in the restatement of prior year turnover
with a corresponding reduction to cost of sales of #26.1 million and an increase
to other operating income of #0.8 million. There is no impact on the prior year
profit before taxation or the taxation charge. The impact on the prior year
balance sheet has been a reclassification between stock and debtors of #8.7
million. There has been no impact on current year profit before taxation or the
taxation charge. Classification of the items referred to above is in line with
the prior year. In addition there has been a reclassification of advertising
contributions from suppliers between cost of sales and selling expenses.
2004 2003
Before Operating Non-operating
exceptional exceptional Exceptional
Total Items items items Total
#m #m #m #m #m
(b) Profit before interest and taxation
- continuing operations
Retail 46.2 35.8 (14.4) (5.5) 15.9
Entertainment Wholesale and Publishing 42.2 35.6 - - 35.6
Common (costs)/income (11.5) (11.0) 8.1 - (2.9)
Profit before interest 76.9 60.4 (6.3) (5.5) 48.6
Common (costs)/income before exceptional items relate to the Group's Corporate
Centre, amortisation of acquisition goodwill of #3.1 million (2003: #3.0
million) and other consolidation adjustments. There were no exceptional items
during the year.
2004 2003
#m #m
(c) Net assets
Retail 447.7 584.0
Entertainment Wholesale and Publishing 170.2 158.3
Woolworths Group (156.3) (307.0)
Total Group 461.6 435.3
2. Profit on Ordinary Activities Before Taxation
2004 2003
#m #m
Profit on ordinary activities before taxation is stated after charging/(crediting):
Operating leases:
Land and buildings 147.4 140.6
Plant and equipment 5.6 5.3
Depreciation of tangible fixed assets:
Owned assets 56.4 56.1
Loss on the disposal of fixed assets 2.1 2.0
Net incomefrom property portfolio transactions (6.9) (6.6)
Amortisation of acquisition goodwill 3.1 3.0
Amortisation of other intangible assets 1.9 1.2
Auditors' remuneration for audit:
To PricewaterhouseCoopers LLP 0.4 0.3
Auditors' remuneration for non-audit services 0.1 0.3
3. Taxation on profit on ordinary activities
(a) Analysis of charge in the year
2004 2003
#m #m
UK Corporation tax
Current tax
UK corporation tax charge on profits for the year (22.7) (13.2)
Share of joint venture's taxcharge (0.5) (1.4)
Adjustments in respect of prior periods 3.6 1.5
(19.6) (13.1)
Foreign tax charge on profits/(losses) for the year (0.5) (0.6)
Adjustments in respect of prior periods - 0.1
Total current tax (20.1) (13.6)
Current year deferred tax movement (0.5) 0.9
Total taxation (20.6) (12.7)
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2003: higher) than the standard rate of
corporation tax in the UK (30 per cent). The differences are explained below:
2004 2003
#m #m
Profit on ordinary activities before tax 66.7 38.0
Profit on ordinary activities multiplied by standard rate of corporation tax in (20.0) (11.4)
the UK of 30 per cent (2003: 30 per cent) to give expected charge
Effects of:
Expenses not deductible for tax purposes (primarily goodwill amortisation) (3.1) (2.7)
Capital allowances in excess of depreciation and other timing differences (1.1) (1.6)
Utilisation of tax losses 0.5 0.5
Adjustment to tax charge in respect of previous periods 3.6 1.6
Current tax charge for the year (20.1) (13.6)
4. Dividends
2004 2003
#m #m
Interim paid - 0.36 pence per ordinary share (2003: 0.325 pence) 5.1 4.6
Final proposed - 1.14 pence per ordinary share (2003: 1.0 pence) 16.1 14.1
Total dividends 21.2 18.7
Received/receivable by ESOP Trust 0.2 0.1
5. Earnings per Share
2004 2003
WeightedWeighted
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 46.0 1,396.7 3.3 25.2 1,398.1 1.8
Effect of dilutive share options 101.2 78.8
Diluted earnings per share 46.0 1,497.9 3.1 25.2 1,476.9 1.7
Supplementary earnings per share
Basic earnings per share 46.0 1,396.7 3.3 25.2 1,398.1 1.8
Effect of exceptional items - - - 11.8 - 0.8
Tax impact arising on exceptional items - - - (3.2) - (0.2)
Basic earnings per share before
exceptional items 46.0 1,396.7 3.3 33.8 1,398.1 2.4
Amortisation of acquisition goodwill 3.1 - 0.2 3.0 - 0.2
Basic - adjusted earnings per share 49.1 1,396.7 3.5 36.8 1,398.1 2.6
Diluted earnings per share 46.0 1,497.9 3.1 25.2 1,476.9 1.7
Effect of exceptional items - - - 11.8- 0.8
Tax impact arising on exceptional items - - - (3.2) - (0.2)
Diluted earnings per share before
exceptional items 46.0 1,497.9 3.1 33.8 1,476.9 2.3
Amortisation of acquisition goodwill 3.1 - 0.2 3.0 - 0.2
Diluted - adjusted earnings per share 49.1 1,497.9 3.3 36.8 1,476.9 2.5
6. Consolidated Cash Flow
a) Reconciliation of Operating Profit to Net Cash Flow from Operating Activities
2004 2003
#m #m
Group operating profit 75.7 55.7
Depreciation, amortisation and impairment 61.8 62.7
Release of provision for Streets Online Limited - (6.7)
Increase in stocks (5.9) (46.3)
Increase in debtors (19.2) (26.1)
(Decrease)/increase in creditors (1.5) 35.0
Loss on disposal of fixed assets 2.1 2.0
Net cash inflow from operating activities 113.0 76.3
b) Analysis of Changes in Net Funds
At At
2 February Cash Non cash 31 January
2003 flow Items 2004
#m #m #m #m
Cash and current bank accounts (net of overdraft) 131.3 18.7 - 150.0
Deposit with banks 2.1 (0.7) - 1.4
Cash inflow before use of liquid resources and
financing 133.4 18.0 - 151.4
Short-term loan notes (0.2) 0.2 - -
Senior Notes (98.0) - (0.5) (98.5)
Net funds at end of year 35.2 18.2 (0.5) 52.9
c) Reconciliation of Net Cash Flow to Movement in Net Funds
2004
#m
Increase in cash in the year 18.7
Movement in deposits with banks (0.7)
Movement in short-term loan notes 0.2
Non-cash item (0.5)
Change in net funds in the year 17.7
Net funds at the start of the year 35.2
Net funds at the end of the year 52.9
7. Reconciliation of Movement in Shareholders' Funds
2004 2003
#m #m
Profit for the financial year 46.0 25.2
Dividends (21.2) (18.7)
Retained profit for the financial year 24.8 6.5
Issue of share capital 1.6 0.3
Opening equity shareholders' funds 435.0 428.2
Closing equity shareholders' funds 461.4 435.0
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 couldlead 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 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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