RNS Number:2038J
Woolworths Group PLC
26 March 2003
Woolworths Group plc
Preliminary Results Announcement
26th March 2003
for the year ended 1 February, 2003
Embargoed until 07:00 hrs on 26 March 2003
Highlights
* Profit before taxation, exceptional items and amortisation of
goodwill up 60% to #52.8 million
* Profit before taxation and exceptional items up 94% to #49.8 million
* Earnings per share (before exceptional items and amortisation of
goodwill) increased 63% to 2.6 pence per share
* Proposed final dividend up 11.1% to 1.0 pence per share
* Full year dividend of 1.325 pence, an increase of 10.4%
* Net cash of #35.2 million at year end
* Stronger product ranges and merchandising resulting in market share
gains for Woolworths in Toys, Computer games, DVD and Clothing
* Continued investment in systems with over 40% of retail space with
new EPOS system
* Lower shrinkage, better product availability and improved supply
chain
* #8 million of annualised underlying costs removed from the business
Gerald Corbett, Chairman of Woolworths Group plc, commented:
"The Woolworths business has come a long way since the demerger 19 months ago.
We now have an energetic and experienced retail team, cash in the bank, lower
costs, rising profits and an increasing dividend."
Trevor Bish-Jones, Chief Executive of Woolworths Group plc, commented:
"We have made good progress on improving the operations of the business,
delivered a significant increase in profitability and have a much clearer
understanding of our customers and proposition. There is still much to do but
the strength of the Woolworths business gives us confidence in the continued
recovery."
For further information contact:
Christopher Rogers, Finance Director 0207 706 5689
Nicole Lander, Corporate Affairs 0207 706 5653
Kate Inverarity, Tulchan Communications 0207 353 4200
Overview of financial performance
Profit before tax, exceptionals and goodwill amortisation increased 60 per cent
to #52.8 million, on turnover up 4.5 per cent to #2.7 billion. After
exceptional items and goodwill amortisation, profit before tax was #38.0 million
compared with last year's loss of #46.4 million. Sales growth was driven by a
3.1 per cent increase at Woolworths and a 16.5 per cent increase in the
Entertainment businesses. Total Group like-for-like sales increased by 0.2 per
cent.
2003 2002 % Change
#m #m
Group sales 2,717.4 2,599.3 4.5
Profit before tax, exceptionals and goodwill 52.8 33.0 60.0
amortisation
Profit before tax and exceptionals 49.8 25.7 93.8
Profit before tax 38.0 (46.4)
Adjusted earnings per share 2.6p 1.6p 62.5
before exceptionals and goodwill amortisation
Earnings per share (basic) 1.8p (3.4p)
Full year dividend per share 1.325p 1.2p 10.4
Net cash 35.2 31.1
Operating Review
Woolworths
Sales grew by 3.1 per cent to #2,158.4 million with the Mainchain up 0.2 per
cent to #1,965.4 million and Woolworths big W up 46.1 per cent to #193.0
million. Total Woolworths like-for-like sales were a negative 0.2 per cent;
with the Mainchain a negative 0.4 per cent and Woolworths big W up 3.1 per cent.
Sales in Toys, Stationery, Entertainment and Clothing all moved ahead on a
like-for-like basis but this was offset by weaknesses in Confectionery, Home and
Events.
Gross margins improved by 50 basis points including the effect of improved
shrinkage, which accounted for 30 basis points of this movement. Although
margins were under pressure in Entertainment, Confectionery and Clothing, good
progress was made in Toys, Stationery, Home and Events.
Costs were tightly controlled and, through simplifying the business, cost
savings of #5 million per annum can be realised, effective from August 2002.
Underlying operating profit for Woolworths increased by 68 per cent to #42.4
million.
During the past year, a further five Woolworths big Ws were opened, bringing the
total number of stores trading to 18. Each one set a new standard for sales
achieved in the opening weeks as we refined supporting marketing activity.
Sales performance at Woolworths big W improved markedly over the year with
second quarter like-for-like sales of a negative 0.5 per cent improving to a
positive 4.0 per cent in the fourth quarter. This reflects improvements in both
the product offer and the promotional stance that have flowed from the
integration of the Woolworths and the Woolworths big W commercial functions.
Within the Woolworths big W chain we have stores that have an annual turnover
well in excess of #15 million (inc. VAT) and attract over a million customers.
This gives a clear indication that customers find the format appealing. There
is, however, a need to improve the financial returns from Woolworths big W.
Much work has been undertaken during the year to reduce the capital required to
open a store. Savings of approximately 12 per cent are being achieved which
augurs well for future stores.
Having regained sales momentum we are now putting in place plans to improve
margins. Progress to date includes a new Health and Beauty supply arrangement
with Savers and a renegotiated Clothing contract with Peacocks. The new
Peacocks contract gives greater visibility and accountability over the
performance of their clothing ranges. Driving the margin in Woolworths big W is
key to its success and will govern the speed with which we rollout this format.
MVC
During the year MVC delivered like-for-like sales growth of 7.0 per cent, a very
creditable performance in a difficult specialist music market. To enhance
profitability and to simplify the business we have begun to combine the MVC
commercial function with that of Woolworths Entertainment. This will enable best
practice and expertise to be shared across both MVC and Woolworths.
Uniquely in its market place, MVC has a substantial customer database which
allows it to track the 2.9 million active customers who bought entertainment
product at MVC last year. The potential of this data has not yet been fully
exploited and a series of test marketing activities have begun to establish how
this information can be used to enhance profitability and sales, as well as
enhance customer loyalty to the MVC format.
Entertainment UK
During the year Entertainment UK (EUK) increased both third party and
intra-group sales by an overall 26.4 per cent, driven by strong growth in the
DVD and Games markets. EUK was also successful during the year in winning a
number of new third party customers. Despite the general pressure on margins,
the business' profitability improved driven by sales growth and efficiency gains
within the distribution operation, where the costs to sales ratio was down 0.7
per cent year on year.
VCI Group
Profit performance from VCI Group was strong on the back of the change in mix
from VHS to DVD and strong autumn releases from both its Video and Audio
divisions. Particular video successes included 'Peter Kay's Phoenix Nights', '
Thomas the Tank Engine', 'Cold Feet' and the 'Royle Family'. Although sales
fell by #18.0 million, this reflects the impact of the sale of Disc Distribution
Limited in May 2002. Excluding Disc, sales for VCI (third party and
intra-group) rose by over 25 per cent to #71.5 million.
In July 2002 the Group acquired a controlling stake in Banana Split Productions
Limited, a company that specialises in the creation and production of
pre-recorded videos, feature film trailers, television programming and
advertisements. The acquisition supports VCI's strategy of seeking to develop
its own content and since July 2002 the performance of Banana Split has been
ahead of plan.
Demon Music Group, VCI's music publishing business, achieved a market share of
21.9 per cent, making it the leading label in its sector. Total sales for Demon
increased by 5.0% despite the budget compilations market suffering amidst price
deflation in the full price sector.
Streets Online
Streets Online is a well established e-commerce brand and also supplies web
expertise and support to both the Woolworths and MVC sites. During the year, to
remove further costs from the business, the Streets Online Head Office was
relocated to the EUK site at Hayes. The Group is now well positioned with a
rationalised infrastructure and the capability to participate further in
e-commerce in the future.
The Woolworths Recovery
During the past year the focus for the Group has been on sustainable profit
recovery. Whilst we have rigorously removed excess costs and simplified the
business, we have also continued to invest in and develop the business for the
future. Going forward there is significant opportunity as we refine and build on
the Recovery Plan.
The Recovery Plan detailed in last year's Interim Statement focuses on four key
elements: simplifying the business, strengthening the infrastructure, rebuilding
core retail competencies and developing clearer propositions across all our
retail formats. Good progress is being made across all these areas.
Simplifying the business
At the start of the year, four Woolworths formats were trading each with
independent management structures and commercial policies. This was overly
complex and costly. To address this, the City and Local format management was
amalgamated and the rollout of the loss making General Store format stopped with
the stores now being converted back to the Woolworths Mainchain format.
Additionally, big W was re-branded Woolworths big W and the separate buy and
supply teams that had existed for Woolworths and big W were integrated.
The overall impact of these changes was to remove over 140 roles from central
functions generating expected annualised savings of some #5 million from August
2002. Consolidation of the buying team is already leading to better product
ranges and enhanced buying leverage.
We have also sought to simplify our Entertainment businesses. In October 2002
the Streets Online Head Office was relocated to the EUK site at Hayes. In
addition, the MVC Head Office is to close in April 2003 and the MVC team will
move to Woolworths Head Office and work more closely with the Woolworths
Entertainment business, both of these actions generating further savings of over
#3 million per annum.
Strengthening the infrastructure
During the year investment in Woolworth's IT systems infrastructure totalled
#18.4 million. The building blocks required to give Woolworths integrated
systems are now established, providing greater control over stock and enhancing
the in-store experience for our customers.
Good progress is being made on the migration of all product categories to the
new range planning and replenishment system and, by Summer 2003, all areas will
be fully functional. We continue the rollout of the Kingstore till system where
a further 160 stores will be converted this year so that by January 2004 over
320 stores will be converted representing 67% of retail space. We anticipate
that the programme will be completed during 2005.
In recent years, a weakness of the business has been the physical supply chain
which comes under particular pressure over the Christmas period. To address
this, a supply chain review was undertaken in 2002 to achieve a more robust
approach to planning. This allowed us to flow the seasonal Christmas stock into
the stores earlier and increased our delivery frequencies which resulted in a
more controlled and timely supply of product to the stores and improved
availability for our customers.
In 2003, we are seeking further improvements in the supply chain by increasing
warehouse operating hours and reviewing pack sizes.
The supply chain review has also highlighted the need in the longer term to
update the infrastructure to support the needs of the business. As we grow,
further distribution capacity will become necessary and the location of the
warehouse sites will need to be optimised. We have made good progress towards
defining the optimal configuration of the distribution network to lower costs
and to ensure adequate capacity. We will give a full update on our supply chain
strategy at the Interim results in September.
Rebuilding Core Retail Competencies
Key to the success of any retailer is the ability to source and develop product
that customers really want. During the year we have enjoyed some notable
successes, particularly in the Toy area where our exclusive Chad Valley products
have won industry awards and helped to drive a 1.5 per cent growth in our market
share in Toys.
Our Home ranges are also improving and delivering enhanced margins as we move to
more direct Far Eastern sourcing. This has been facilitated by the
establishment of a dedicated Woolworths Group product sourcing office in Hong
Kong and direct shipments have increased by 10 per cent in the year. In a very
competitive Clothing market we have also gained market share through the ongoing
evolution of our Ladybird brand.
In recent years many basic retail disciplines in-store have slipped. Poor
on-shelf availability, long queues, insufficient staff at key points of the day,
untidy stock rooms and high shrinkage (stock losses) became all too frequent.
The new operations team have begun to address this by putting in place a store
standards and shrinkage reduction programme and have introduced new 'queue
busting' techniques, put in more tills and employed more staff for critical
times of the year (an additional 6,000 at Christmas 2002). The rollout of
Kingstore is a further benefit.
These programmes have already led to a reduction in shrinkage of 0.3 per cent
(as a percentage of sales) in the year, fewer queues at Christmas, better
availability and higher standards in-store. As regular Woolworth's customers
will be aware, however, the results are inconsistent and there remains much to
do. This is being addressed by upgrading the quality of our field management.
Developing clearer propositions
With annual turnover of #2.2 billion and over 6 million customers a week,
Woolworths is the backbone of the Group and provides a significant base on which
to build. A key driver of the enhanced product development has been the clearer
identification of our target customers and understanding their spending habits,
lifestyles and aspirations. Our customers, while being value conscious, do
exhibit aspirational taste. They express a desire for us to strengthen our Kids
offer and view us as a potential destination store for family celebrations.
We are committed to making Woolworths famous for Kids and Celebrations and have
implemented changes to the in-store space allocation that support this strategy.
This, along with the introduction of better ranges covering higher price points,
is resulting in a positive customer reaction and is beginning to drive sales and
margin increases.
To further validate the strategy a number of trial stores were reformatted
during October 2002 to test how far and fast the strategy could be developed.
The reformatting involved a combination of changes to space allocation, product
assortment and store refurbishment. Early results from the Christmas period are
encouraging; particularly those stores where both changes to space and product
offer were made in tandem with an in-store refit. However, it is imperative
that we understand how these stores trade outside of Christmas, and that we have
a statistically robust set of trial stores. Consequently, 4 further stores will
have a major refit in May 2003 and up to 30 stores will have a minor refit.
Their performance will determine the pace at which we embark on a store
refurbishment programme.
Current trading and priorities for 2003
Trading in the new financial year has begun in line with our budgets. Easter,
our biggest trading period outside of Christmas, and Mother's Day, are three
weeks later this year and have yet to occur. It is also too early to assess the
impact on consumer confidence of the war in Iraq. Accordingly this year we will
make a 1st Quarter trading statement, provisionally set for 14th May 2003.
In 2003 we will continue to focus rigorously on operational disciplines in
Woolworths. Our objective is to grow our sales but also, more importantly, to
improve our operating margin through changing the product ranges and space mix,
coupled with new sources of supply and an increase in new product development.
Plans are underway for further cost reduction, continued rollout of new systems
and more operational improvements. Successful retailing is about detail and
there remains significant potential for profit improvement in doing what we do
better.
Longer-term growth will be driven by strengthening the Woolworths high street
proposition and getting our out-of-town format, Woolworths big W, trading to its
full potential. Progress on both these areas has been made during the year and
work will continue to maximise the opportunity they represent. The strength of
the Woolworths brand and the overall power of our market position in
Entertainment are a good base on which to build.
Financial Review
Profit before tax, exceptionals and goodwill amortisation increased 60 per cent
to #52.8 million, on turnover up 4.5 per cent to #2.7 billion. After
exceptional items and goodwill amortisation, profit before tax was #38.0 million
compared with last year's loss of #46.4 million. Sales growth was driven by a
3.1 per cent increase at Woolworths and a 16.5 per cent increase in the
Entertainment businesses. Total Group like-for-like sales increased by 0.2 per
cent.
Exceptional Charges
Total net exceptional charges for the year were #11.8 million. This comprised
non-operating exceptional charges of #5.5 million relating to the closure of the
Woolworths General Store format and operating exceptional items of #6.3 million
which were the net of #13.0 million of restructuring costs and #6.7 million of
exceptional income.
The principal components of the restructuring costs are (1) the closure of the
Woolworths General Store format (#3.0 million); (2) the restructuring of central
functions at Woolworths Head Office (#4.4 million); and (3) the reorganisation
of the MVC and Streets Online Head Offices together with the write-down of
certain Streets Online fixed assets (#5.6 million).
As a result of the Group's acquisition of the minority interest in Streets
Online, completed in March 2003, the level of provision made in 2002 against
acquisition goodwill and for associated liabilities of Streets Online was
reviewed and #6.7 million of the provision made in 2002 for those associated
liabilities has been released as exceptional income.
Taxation
The effective tax rate for the 52 weeks to 1 February 2003 was 33.4 per cent.
This compares to an effective tax rate of a negative 3.2 per cent for the prior
year caused by the losses reported in that period, and an effective tax rate of
36.1 per cent for the 6 months to 3 August 2002 (6 months to 4 August 2001: 36.1
per cent). Under existing tax legislation, it is anticipated that the effective
Group tax rate will continue to move gradually towards the standard corporation
tax rate.
The 1.0 per cent National Insurance Contributions increase announced in the
Chancellor's 2002 Budget to commence in April 2003 will impact the Group's
profitability by an estimated extra charge of #1.5 million per annum.
Earnings per Share and Dividends
Basic earnings per share was 1.8 pence compared to a loss of 3.4 pence in 2002.
Adjusted earnings per share before exceptional items and the amortisation of
acquisition goodwill was 2.6 pence compared to 1.6 pence in 2002.
The Board has proposed a final dividend of 1.0 pence per share making a total
dividend for the year of 1.325 pence per share, an increase of 10.4 per cent on
the previous year. The dividend is covered 2.0 times by earnings before
exceptional costs and goodwill amortisation (1.3 times after exceptional costs
and goodwill amortisation). This final dividend will be paid on 26 June 2003 to
shareholders on the register at close of business on 4 April 2003, subject to
the approval of shareholders at the Company's Annual General Meeting. This is
to be held at 11 am on Tuesday 24 June 2003 at The Hilton London Metropole, 225
Edgware Road, London, W2 2QC.
Cashflow and Net Debt
At the year end the Group had net cash balances of #35.2 million. Cash
generation across the Group remained healthy with a cash inflow from operating
activities of #76.3 million, generated predominantly by the increase in profit
for the year. Working capital management remains a priority. Year-end stock was
#37.6 million higher than the prior year due to five new Woolworths big W store
openings in the year, a change in mix at Entertainment UK from VHS to higher
value DVD product, and a conscious effort to improve availability at the start
of the new financial year.
At demerger, the Group put in place a #250 million 3-year committed revolving
credit facility. This comprised a #83 million 364 day facility and a #167
million 3 year loan. Due to the improving cash position, in June 2002 the 364
day facility was cancelled and the #167 million 3-year element reduced to #150
million. At the balance sheet date the Group had an undrawn #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 #10.6 million from
#13.9 million in 2002. Net interest charges were covered 6.0 times before
exceptional costs and goodwill amortisation (4.6 times after exceptional costs
and goodwill amortisation).
Acquisitions and disposals
VCI, one of the Group's principal subsidiaries, completed a number of small
corporate transactions during the year. VCI sold the trade and assets of its
distribution business, Disc Distribution Limited, on 31 May 2002, and acquired
76.6 per cent of an independent production company, Banana Split Productions
Limited, on 1 July 2002 for a net consideration (including expenses) of #2.1
million. Cinema Club ceased trading as a joint venture between VCI and Columbia
Tri-Star on 31 May 2002, and has subsequently relaunched itself as the
specialist budget catalogue division of VCI.
Pensions
On 1 April 2002 the Group established the Woolworths Group Pension Scheme (WGPS)
(a funded defined benefit scheme) and the Woolworths Group Retirement Trust
(WGRT) (a defined contribution scheme) to replace the Group's participation in
the equivalent Kingfisher schemes. Employees were invited to join these new
schemes and existing Kingfisher pension rights have been transferred across for
those members who elected to do so. Existing and deferred pensioners have
remained with the relevant Kingfisher scheme.
Accounting for Pensions
The full implementation of FRS17 has now been deferred, pending the review of
International Accounting Standard 19 'Employee Benefits', and the Group has
continued to account for pension costs under SSAP 24.
Actuarial Valuation and MFR
During the year the first formal valuation of the WGPS, as at 1 April 2002, was
carried out by independent actuaries. Following the results of the valuation,
the Group agreed to increase its contribution to WGPS by 0.9 per cent to a rate
of 13.5 per cent of pensionable pay, with effect from 3 February 2002. Under
SSAP 24 the pension cost for the year is #17.0 million, which is split into a
regular cost of #15.7 million and a variation of #1.3 million.
The actuary also assessed the Minimum Funding Requirement (MFR) level for the
Group at the valuation date to have been 110 per cent. Although recent
investment conditions since the valuation have not been favourable we estimate
that the MFR level at the end of the financial year remains above 100 per cent.
Impact of Financial Reporting Standard 17 'Retirements Benefits'
The valuation of the WGPS as at 1 February 2003, as measured in accordance with
FRS 17, was a net pension deficit of #94.4 million after the benefit of
potential deferred taxation at 30 per cent amounting to #40.4 million. This
compares to a net pension deficit of #28.3 million as at 1 April 2002 after the
benefit of potential deferred taxation at 30 per cent amounting to #12.1
million.
The increase in the deficit over the year is primarily attributable to the
actuarial loss that would have been recognised through the Statement of Total
Recognised Gains and Losses as required by FRS 17 if fully implemented.
Approximately #18 million of the increase in the deficit over the ten month
period results from the change in the assumptions used to value the liabilities,
with the balance due largely to a lower than expected value of assets in the
fund as a result of the global downturn in equities.
Had the Group charged pension costs to the profit and loss account on the FRS 17
basis, then the charge for the ten month period from 1 April 2002 to 1 February
2003 (when the WGPS has been in existence) would have been #15.2 million,
compared to a pro-rated 10 month SSAP24 charge of #14.2 million.
Group Profit and Loss Account
2003 2002
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
#m #m #m #m #m #m
Turnover - Group and share of joint
ventures
Continuing operations 2,767.1 - 2,767.1 2,621.5 - 2,621.5
Discontinued operations - - - 1.6 - 1.6
Less: share of joint venture's turnover (49.7) - (49.7) (23.8) - (23.8)
Group turnover 2,717.4 - 2,717.4 2,599.3 - 2,599.3
Cost of sales (1,943.1) - (1,943.1) (1,850.3) (18.0) (1,868.3)
Gross profit 774.3 - 774.3 749.0 (18.0) 731.0
Selling expenses (582.2) - (582.2) (561.9) - (561.9)
Administrative expenses (140.4) (6.3) (146.7) (160.1) (42.0) (202.1)
Other operating income 10.3 - 10.3 9.5 - 9.5
Group operating profit/(loss) 62.0 (6.3) 55.7 36.5 (60.0) (23.5)
Analysed as:
Continuing operations 62.0 (6.3) 55.7 40.2 (60.0) (19.8)
Discontinued operations - - - (3.7) - (3.7)
Share of operating (loss)/profit in (1.6) - (1.6) 3.1 - 3.1
joint ventures
Operating profit/(loss) including joint 60.4 (6.3) 54.1 39.6 (60.0) (20.4)
ventures
Non-operating exceptional items - (5.5) (5.5) - (12.1) (12.1)
Profit/(loss) before interest 60.4 (11.8) 48.6 39.6 (72.1) (32.5)
Net interest payable (10.6) - (10.6) (13.9) - (13.9)
Profit/(loss) on ordinary activities 49.8 (11.8) 38.0 25.7 (72.1) (46.4)
before taxation
Taxation (15.9) 3.2 (12.7) (10.2) 8.7 (1.5)
Profit/(loss) on ordinary activities 33.9 (8.6) 25.3 15.5 (63.4) (47.9)
after taxation
Equity minority interest (0.1) - (0.1) 0.7 - 0.7
Profit/(loss) for the financial year 33.8 (8.6) 25.2 16.2 (63.4) (47.2)
Dividends payable to shareholders (18.7) - (18.7) (16.9) - (16.9)
Dividends payable to Kingfisher plc - - - (2,229.0) - (2,229.0)
Retained profit/(loss) for the financial 15.1 (8.6) 6.5 (2,229.7) (63.4) (2,293.1)
year
Earnings/(loss) per share (pence)
Basic 1.8 (3.4)
Diluted 1.7 (3.4)
Basic - adjusted* 2.6 1.8 1.6 (3.4)
Diluted - adjusted* 2.5 1.7 1.6 (3.4)
* Adjusted earnings per share is calculated before exceptional items and
amortisation of acquisition goodwill.
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.
Group Balance Sheet
2003 2002
#m #m
Fixed assets
Intangible assets 63.7 68.4
Tangible assets 332.6 345.5
Investments - own shares 4.2 2.3
- joint ventures - share of gross assets 13.6 16.1
- share of gross liabilities (13.4) (16.0)
400.7 416.3
Current assets
Stocks 348.8 311.2
Debtors 155.0 122.8
Cash at bank and in hand 133.8 129.1
637.6 563.1
Creditors due within one year (477.7) (428.5)
Net current assets 159.9 134.6
Total assets less current liabilities 560.6 550.9
Creditors due after one year (98.0) (97.5)
Provisions for liabilities and charges (27.3) (25.2)
Net assets 435.3 428.2
Capital and reserves
Called up share capital 176.0 175.9
Share premium reserve 0.2 -
Demerger reserve 24.1 24.1
Revaluation reserve 3.3 3.3
Profit and loss account 231.4 224.9
Equity shareholders' funds 435.0 428.2
Equity minority interests 0.3 -
435.3 428.2
Group Cash Flow Statement
2003 2002
#m #m #m #m
Cash flows from operating activities
Net inflow from operating activities 76.3 211.5
Outflow from closure of e-Woolworths - (4.7)
76.3 206.8
Dividends received from joint ventures 4.1 -
Returns on investments and servicing of finance
Interest received 1.9 2.6
Debt issue costs - (2.5)
Interest paid (12.3) (16.8)
(10.4) (16.7)
Taxation paid (2.9) (7.3)
Capital expenditure and financial investment
Purchase of intangible fixed assets (0.1) (2.2)
Purchase of tangible fixed assets (41.9) (72.9)
Purchase of own shares (1.9) (2.3)
Proceeds from sale of tangible fixed assets 0.5 -
(43.4) (77.4)
Acquisitions and disposals
Cash acquired with acquisition 0.4 -
Purchase of subsidiary undertaking (2.5) -
(2.1) -
Equity dividends paid (17.3) (9.8)
Cash inflow before use of liquid resources and financing 4.3 95.6
Management of liquid resources
Increase in short-term deposits with banks (2.1) -
Financing
Bridging loan taken out - 100.0
Drawings from revolving credit facility - 100.0
Repayment of debt to Kingfisher on demerger - (200.0)
Repayment of bridging loan - (100.0)
Repayment of revolving credit facility - (100.0)
Movement in short-term loan notes (0.3) (2.2)
Issue of share capital 0.3 -
Issue of long-term debt - 100.0
Movement in funding balances with Kingfisher group companies - 136.9
- 34.7
Increase in cash in the period 2.2 130.3
Notes to the Accounts
1. Segmental Analysis
Turnover
Turnover arises in the UK only and represents retail sales, services supplied
and other income. Turnover excludes Value Added Tax.
The analysis of turnover by destination is not materially different to the
analysis of turnover by origin.
2003 2002
#m #m
(a) Turnover by origin
Woolworths - continuing 2,158.4 2,093.6
Entertainment 1,229.1 1,034.3
Intergroup (670.1) (554.6)
Other - 24.4
Continuing operations 2,717.4 2,597.7
e-Woolworths - discontinued - 1.6
Group Turnover 2,717.4 2,599.3
2003 2002
Before Operating Non-operating Before Operating Non-operating
exceptional exceptional exceptional exceptional exceptional exceptional
costs costs costs Total costs costs costs Total
#m #m #m #m #m #m #m #m
(b) Profit before
interest and taxation
Woolworths - 42.4 (8.8) (5.5) 28.1 25.3 (13.8) - 11.5
continuing
Entertainment 29.0 (5.6) - 23.4 22.7 (4.2) - 18.5
Common (costs)/income (11.0) 8.1 - (2.9) (4.7) (42.0) - (46.7)
Continuing operations 60.4 (6.3) (5.5) 48.6 43.3 (60.0) - (16.7)
e-Woolworths - - - - - (3.7) - (12.1) (15.8)
discontinued
Profit/(loss) before 60.4 (6.3) (5.5) 48.6 39.6 (60.0) (12.1) (32.5)
interest
Common (costs)/income before exceptional costs relate to the Group's Corporate
Centre, amortisation of acquisition goodwill of #3.0 million (2002: #7.3
million) and other consolidation adjustments.
2003 2002
#m #m
(c) Net assets
Woolworths 564.5 532.2
Entertainment 177.8 180.8
Woolworths Group (307.0) (284.8)
Total Group 435.3 428.2
2. Operating Exceptional Items
Operating exceptional items total #6.3 million (2002: #60.0 million) and are
analysed as follows:
2003 2002
#m #m
Restructuring costs 13.0 -
Demerger - related costs - 15.3
Stock - related costs - 18.0
(Reversal of)/ provision for Streets Online Limited (6.7) 26.7
Total operating exceptional items 6.3 60.0
Restructuring operating exceptional costs total #13.0 million and relate to; (1)
the closure of the Woolworths General Store format and the subsequent closure or
reversion of these stores into the Woolworths Mainchain format (#3.0 million);
(2) the restructure of central functions at Woolworths Head Office (#4.4
million); and (3) the reorganisation of the MVC and Streets Online Head Offices,
together with the write-down of certain Streets Online fixed assets (#5.6
million).
Demerger-related operating exceptional costs in 2002 related to a number of
one-off adjustments relating to the demerger transaction.
Stock-related operating exceptional charges in 2002 related to the write-off of
overstated phonecard stock and unsaleable Entertainment stock (#11.5 million)
and adjustments to the Group's stock NRV and shrinkage provisions (#6.5 million)
in accordance with Financial Reporting Standard 18 'Accounting Policies'.
A first-year impairment review of the acquisition goodwill relating to Streets
Online Limited was undertaken in 2002 in accordance with Financial Reporting
Standard 10 'Goodwill and Intangible Assets'. The resulting provision of #26.7
million represented a full write down of the goodwill and associated liabilities
arising on the acquisition of Streets Online Limited. As a result of the
Group's acquisition of the minority interest in Streets Online, completed in
March 2003, the level of provision made in 2002 against acquisition goodwill and
for associated liabilities of Streets Online was reviewed, and #6.7 million of
the provision made in 2002 for those associated liabilities has been released as
exceptional income.
The tax effect of these operating exceptional items in aggregate is #3.2 million
credit (2002: #6.3 million credit). The cash effect of these operating
exceptional items is a #5.8 million outflow (2002: #1.7 million outflow).
3. Non-Operating Exceptional Items
Non-operating exceptional items total #5.5 million (2002: #12.1 million) and are
analysed as follows:
2003 2002
#m #m
Disposal of fixed assets 5.5 -
e-commerce restructuring - 12.1
Total non-operating exceptional items 5.5 12.1
The disposal of fixed assets relates to the disposal of pharmacy licences and
other store assets as part of the closure of the Woolworths General Store
format. The e-commerce restructuring cost in 2002 related to the closure of
e-Woolworths.
The tax effect of these non-operating exceptional items is #nil (2002: #2.4
million credit). There is no cash effect of these non-operating exceptional
items (2002: #4.7 million outflow).
4. Profit on Ordinary Activities Before Taxation
2003 2002
#m #m
Profit on ordinary activities before taxation is stated after charging/
(crediting);
Operating leases:
Land and buildings 140.6 130.6
Plant and equipment 5.3 3.9
Depreciation of tangible fixed assets:
Owned assets 56.1 58.3
Loss on the disposal of fixed assets 2.0 7.3
Net income from property portfolio transactions (6.0) (3.4)
Amortisation of acquisition goodwill 3.0 7.3
Amortisation of other intangible assets 1.2 1.5
Auditors' remuneration for audit:
To PricewaterhouseCoopers LLP 0.3 0.3
Auditors' remuneration for non-audit services 0.3 0.1
5. Taxation
(a) Analysis of charge in the year
2003 2002
#m #m
UK Corporation tax
Current tax
UK corporation tax (charge)/credit on profits/(losses) for the year (13.2) 2.4
Share of Joint Venture's tax charge (1.4) (2.0)
Adjustments in respect of prior periods 1.5 0.6
(13.1) 1.0
Foreign tax charge on profits/(losses) for the year (0.6) (0.6)
Adjustments in respect of prior periods 0.1 0.2
Total current tax (13.6) 0.6
Current year deferred tax movement 0.9 (2.1)
Total taxation (12.7) (1.5)
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2002: lower) than the standard rate of
corporation tax in the UK (30 per cent). The differences are explained below:
2003 2002
#m #m
Profit/(loss) on ordinary activities before tax 38.0 (46.4)
Profit/(loss) on ordinary activities multiplied by standard rate of corporation (11.4) 13.9
tax in the UK of 30 per cent (2002: 30 per cent) to give expected (charge)/credit
Effects of:
Expenses not deductible for tax purposes (primarily goodwill amortisation)
(2.7) (14.3)
Capital allowances in excess of depreciation and other timing differences (1.6) (2.5)
Deferred tax not recognised on losses carried forward - 2.3
Utilisation of tax losses 0.5 0.4
Adjustment to tax charge in respect of previous periods 1.6 0.8
Current tax (charge)/credit for the year (13.6) 0.6
6. Dividends
2003 2002
#m #m
Interim paid - 0.325 pence per ordinary share (2002: 0.3 pence) 4.6 4.2
Final proposed - 1.0 pence per ordinary share (2002: 0.9 pence) 14.1 12.7
Paid to Kingfisher on demerger - 2,223.4
Other dividends paid to Kingfisher - 5.6
Total dividends 18.7 2,245.9
Received/receivable by ESOP Trust 0.1 0.1
7. Earnings per Share
2003 2002
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 25.2 1,398.1 1.8 (47.9) 1,399.5 (3.4)
shareholders
Effect of dilutive share options 78.8 23.8
Diluted earnings per share 25.2 1,476.9 1.7 (47.9) 1,423.3 (3.4)
Supplementary earnings per share
Basic earnings per share 25.2 1,398.1 1.8 (47.9) 1,399.5 (3.4)
Effect of exceptional items 11.8 - 0.8 72.1 - 5.1
Tax impact arising on exceptional items (3.2) - (0.2) (8.7) - (0.6)
Basic earnings per share before exceptional 33.8 1,398.1 2.4 15.5 1,399.5 1.1
items
Amortisation of acquisition goodwill 3.0 - 0.2 7.3 - 0.5
Basic - adjusted earnings per share 36.8 1,398.1 2.6 22.8 1,399.5 1.6
Diluted earnings per share 25.2 1,476.9 1.7 (47.9) 1,423.3 (3.4)
Effect of exceptional items 11.8 - 0.8 72.1 - 5.1
Tax impact arising on exceptional items (3.2) - (0.2) (8.7) - (0.6)
Diluted earnings per share before 33.8 1,476.9 2.3 15.5 1,423.3 1.1
exceptional items
Amortisation of acquisition goodwill 3.0 - 0.2 7.3 - 0.5
Diluted - adjusted earnings per share 36.8 1,476.9 2.5 22.8 1,423.3 1.6
8. Consolidated Cash Flow
a) Reconciliation of Operating Profit to Net Cash Flow from Operating Activities
2003 2002
#m #m
Group operating profit/(loss) 55.7 (23.5)
Depreciation, amortisation and impairment 62.7 67.1
(Reversal of)/provision for Streets Online Limited (6.7) 26.7
(Increase)/decrease in stocks (37.6) 90.5
(Increase)/decrease in debtors (34.8) 2.5
Increase in creditors 35.0 48.2
Loss on disposal of fixed assets 2.0 -
Net cash inflow from operating activities 76.3 211.5
b) Analysis of Changes in Net Funds
At At
3 February Cash Non cash 1 February
2002 flow Items 2003
#m #m #m #m
Cash and current bank accounts (net of overdraft) 129.1 2.2 - 131.3
Deposit with banks - 2.1 - 2.1
Short-term loan notes (0.5) 0.3 - (0.2)
Medium-term loan (97.5) - (0.5) (98.0)
Net cash at end of year 31.1 4.6 (0.5) 35.2
c) Reconciliation of Net Cash Flow to Movement in Net Funds
2003
#m
Increase in cash in the year 2.2
Deposit with banks 2.1
Movement in short-term loan notes 0.3
Non-cash item (0.5)
Change in net cash in the year 4.1
Net cash at the start of the year 31.1
Net cash at the end of the year 35.2
9. Reconciliation of Movement in Shareholders' Funds
2003 2002
#m #m
Profit/(loss) for the financial year 25.2 (47.2)
Dividends (18.7) (2,245.9)
Retained profit/(loss) for the financial year 6.5 (2,293.1)
Issue of share capital 0.3 -
Opening equity shareholders' funds 428.2 2,721.3
Closing equity shareholders' funds 435.0 428.2
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 website www.woolworthsgroupplc.co.uk
The enclosed financial information is derived from the full Group Financial
Statements for the 52 weeks ended 1 February 2003 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 2003. Following this posting, copies will be available
from the Company Secretary, Woolworths Group plc, Woolworths House, 242-246
Marylebone Road, London NW1 6JL and will be available on the Group website
www.woolworthsgroupplc.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEWEEISDSESD