Publications
Woolworths has released a summary of its Unaudited Interim Group Results for the 26 weeks ending on 26 December 2021, Cash Dividend Declaration and Changes to the Board of Directors.
Commentary on Performance
Group turnover and concession sales for the 26 weeks ended 26 December 2021 ('current period' or 'period') decreased by 2.1%, compared to the 26 weeks ended 27 December 2020 ('prior period') and by 0.3% in constant currency terms. Online sales grew by 22.4%, contributing 13.7% to the Group’s total turnover and concession sales for the period. Overall trading momentum improved in the last six weeks of the period, with sales growing by 3.0%, and by 3.5% in constant currency terms, supported by more targeted Black Friday promotions, positive festive season trade, and the lifting of lockdown restrictions in Australia.
The results for the current period are not directly comparable to that of the prior period, given the impact of lost sales arising from the prolonged lockdowns in Australia and, to a lesser degree, disruptions in South Africa, coupled with the absence of JobKeeper allowances in Australia and rent relief, which supported the prior period base. The results of the prior period also included the profit on the sale of the Bourke Street Men’s property, as well as lease exit and modification gains. Earnings per share (‘EPS’) was 167.9cps compared to 288.8cps for the prior period, while headline EPS (‘HEPS’) and adjusted diluted HEPS decreased by 35.6% and 16.3% over the prior period to 168.2cps and 162.2cps, respectively.
The Group ended the period with a strong balance sheet and a net cash position of R258 million. Having successfully progressed our capital restructuring in Australia, and as a result of our ongoing cash generation initiatives, David Jones ended the period with a net cash position of A$347 million. Given the level of excess cash in this business, the Board of David Jones therefore declared a special dividend to WHL of A$90 million (approximately R1 billion) after period end, which will, in the interim, be utilised to reduce debt in South Africa.
South Africa
In South Africa, trading conditions earlier in the reporting period were impacted by the ongoing effects of Covid-19, the civil unrest in July, power outages and international supply chain disruptions and supplier delays. International travel restrictions during the key festive season affected inbound tourism and consumption to some degree.
WOOLWORTHS FASHION, BEAUTY AND HOME ('FBH')
The FBH business grew turnover and concession sales by 4.2% and by 4.7% in comparable stores, with price movement of 5.4%. Growth on the prior period was impacted by the reduced footprint, rationalising brands and SKUs and the timing of summer clearance. The slower trading momentum in the last six weeks of the period was due, in part, to underperformance in selected Womenswear categories. Online sales grew by 19.2%, contributing 4.4% of South African sales, while the ongoing execution of space reduction initiatives reduced the footprint by 6.1%, resulting in improved trading densities.
With a deliberate focus on driving full-price sales, coupled with increased promotional effectiveness, gross profit margin increased by 40bps to 46.3%, notwithstanding inflationary supply chain pressures. Expenses reduced by 0.9%, as we improved operating efficiencies through space reduction and other initiatives. Adjusted operating profit increased by 34.0% to R780 million, resulting in an operating margin of 11.6% for the period.
WOOLWORTHS FOOD
The Woolworths Food business grew turnover and concession sales by 3.8% for the half, and by 5.8% in the last six weeks of the period. Sales in comparable stores grew by 2.8%, with price movement of 2.6% and underlying product inflation of 3.7%. Sales growth should be considered in the context of the high Covid-19 base, which benefitted from increased home consumption. Relative to the comparative 2019 period, sales have grown by a cumulative 15.2%. Online sales increased by 55.8%, contributing 3.1% of South African sales, while space grew by 2.2% relative to the prior period.
Gross profit margin of 24.1% was 70bps lower than the prior period, as a result of the high volumes and low waste in the base, continued price investment, and the higher online sales contribution. Expenses grew by 6.3%, due to the ongoing investment in online and digital capabilities and higher energy costs. Adjusted operating profit declined by 8.0% to R1 409 million, returning an operating margin of 7.2% for the period.
WOOLWORTHS FINANCIAL SERVICES ('WFS')
The WFS net book grew by 5.3% year-on-year to the end of December 2021, compared to a 7.8% contraction at 31 December 2020, reflecting the recovery in consumer spend. The annualised impairment rate for the six months ended 31 December 2021 improved to 4.0%, compared to 4.1% in the prior period.
Australia and New Zealand
Trade was significantly impacted by government-imposed Covid restrictions across the region, where we were unable to trade in stores representing 70% of our brick-and-mortar sales for over three months during the period. The easing of restrictions and reopening of stores, coupled with pent-up consumer demand, delivered positive sales growth in the last six weeks of the period, notwithstanding the shift of Boxing Day sales into the second half of this financial year versus the first half of the prior period.
DAVID JONES ('DJ')
DJ turnover and concession sales declined by 9.2% and by 9.0% in comparable stores for the half but grew by 3.2% in the last six weeks of the period (7.7% adjusting for the shift in Boxing Day sales). In line with our space optimisation strategy, trading space reduced by a further 5.8% relative to the prior period. Online sales increased by 44.2% and contributed 28.1% to total sales during the period.
Gross profit margin increased by 20bps to 35.0%, as a result of reduced markdowns, an improved inventory position, and the timing of the Boxing Day sale. Expenses declined by 1.8% on the prior period, as a result of store closures, space reduction and cost-out initiatives, notwithstanding Covid-related government support and rent concessions in the prior period base. Adjusted operating profit of A$31.0 million was 44.6% down on the prior period, returning an operating margin of 3.2%.
COUNTRY ROAD GROUP ('CRG')
CRG sales declined by 3.1% and by 3.2% in comparable stores for the half but grew by 1.7% in the last six weeks of the period. Online sales increased by 3.6% and contributed 33.8% to total sales, while trading space reduced by 7.4% relative to the prior period.
Gross profit margin of 59.5% was 50bps lower than the prior period, mainly due to increased freight and online fulfilment costs. Expenses for the current period increased by 15.8%, as a result of the Covid-related government support and rent relief benefits in the prior year base. Adjusted operating profit declined by 48.9% to A$48.0 million for the current period, resulting in an operating margin of 9.7%.
Outlook
The South African economy is showing encouraging signs of a post-pandemic recovery. Notwithstanding this, high unemployment, coupled with rising inflation and rising interest rates, are likely to remain a headwind to the outlook for consumer spend. In Australia, trading conditions are expected to improve post the Omicron peak at the beginning of the second half, as restrictions ease and consumer confidence recovers. Footfall in stores is also expected to improve, albeit that it is likely to remain below pre-Covid levels, particularly in CBD areas. Whilst the prospect of rising interest rates will have some impact, the underlying fundamentals of the economy are sound with record low unemployment, rising wages and a robust housing market.
Global supply chain disruptions and high freight costs continue to pose a risk to both the cost and supply of product.
We remain steadfast and focused on the execution of our strategies and deliberate in our drive for sustainable growth and sound capital management across the Group. We have a strong balance sheet, which provides a solid foundation for future investment for profitable growth.
Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group's external auditors and does not constitute an earnings forecast.
H Brody, Chairman, Cape Town1 March 2022
R Bagattini, Group Chief Executive Officer
DIVIDEND DECLARATION
The Board of Directors of WHL ('Board') has taken a decision to declare an interim gross cash dividend per ordinary share ('dividend') based on a pay-out ratio of 60% of headline earnings of the combined Woolworths South Africa business segments (FBH, Food and WFS).
Notice is hereby given that the Board has declared an interim dividend of 80.5 cents (64.4 cents net of dividend withholding tax) for the 26 weeks ended 26 December 2021. The Company did not declare an interim dividend in the prior period. The dividend has been declared from reserves and therefore does not constitute a distribution of ‘contributed tax capital’ as defined in the Income Tax Act, 58 of 1962. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.
The issued share capital at the declaration date is 1 051 890 006 ordinary shares. The salient dates for the dividend will be as follows:
- Last day of trade to receive a dividend: Tuesday, 22 March 2022
- Shares commence trading ‘ex’ dividend: Wednesday, 23 March 2022
- Record date: Friday, 25 March 2022
- Payment date: Monday, 28 March 2022
Share certificates may not be dematerialised or rematerialised between Wednesday, 23 March 2022 and Friday, 25 March 2022, both days inclusive. Ordinary shareholders who hold dematerialised shares will have their accounts at their CSDP or broker credited or updated on Monday, 28 March 2022. Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders’ bank accounts on the payment date. Where the transfer secretaries do not have the banking details of any certificated shareholders, the cash dividend will be held in trust by the transfer secretaries pending receipt of the relevant certificated shareholder’s banking details after which the cash dividend will be paid via electronic transfer into the personal bank account of the certificated shareholder.
CA Reddiar, Group Company Secretary, Cape Town, 1 March 2022.
CHANGES TO THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Shareholders and bondholders are hereby advised, further to the Company’s previous announcement on 30 September 2021 on JSE Stock Exchange News Service (‘SENS’) in this regard, that Ms Zarina Bassa will step down from the WHL Board; as lead independent director of WHL; and as a member of the WHL Remuneration and Talent Management, Nominations, Risk and Compliance, Audit, and Treasury Committees, with effect from 31 March 2022.
Ms Bassa has served WHL with distinction since her appointment in November 2011 and has resigned given the Board’s tenure guidelines, which provides that tenures beyond nine years are only extended in exceptional circumstances.
The Board thanks Zarina for her commitment and extensive contributions to WHL over the years and wishes her well in her future endeavours.
The following changes to the Board were advised on the SENS, during the period under review:
- Ms Zyda Rylands stepped down as the Chief Executive Officer of Woolworths South Africa (WSA) and as an Executive director of WHL, with effect from 30 September 2021. She has been appointed as Chief Executive Officer of the Food business within Woolworths South Africa.
- Mr Sam Ngumeni, an Executive director, was appointed as a member of the WHL Social and Ethics and Sustainability Committees, with effect from 1 October 2021.
- Mr David Kneale, an independent Non-executive director, stepped into the position of Chairman of the WHL Remuneration and Talent Management Committee with effect from 25 November 2021 and of the WHL Risk and Compliance Committee, with effect from 1 March 2022.
- Ms Phumzile Langeni has been appointed as an independent Non-executive director, with effect from 1 April 2022. She will also serve on the Risk and Compliance and Audit Committees of the Group.
This post was written, sponsored and supplied by Woolworths.
