Woolworths reports an increase in earnings

The group's diluted earnings per share rose to 96.6 cents for the period, from 83.4 cents.

An interim dividend of 50.5 cents was declared from 38 cents in 2009.

Revenue was up 9.4% to R12.7 billion and operating profit was 20.4% higher at R1.1 billion.

Looking up

Turnover growth of 9.8% combined with good margin improvement in Woolworths

Retail, effective cost control across the group and a significant improvement in the impairment charge in Woolworths Financial Services resulted in profit before tax growth of 22.1%.

Shareholders' return on equity increased from 42.4% to 43.3%.

Food sales were up 11.8% for the period and comparable stores increased by 9.1%, while clothing sales, including Country Road in South Africa, were 11.5% up for the period.

Clothing sales up

The group said overall clothing and general merchandise grew by 8.1% and was lower than clothing growth due in part to the decision to rationalise the unprofitable cellphone handset business.

The group's Australian division, Country Road grew turnover by 3.7%, including the South African operations in Australian dollars.

"Australia experienced a tough retail environment and comparable stores declined by 9.9% in that market. The difficult conditions were anticipated and significant cost saving initiatives were implemented during the period to off-set this. As a result, profit before tax grew 8.3% in Australian dollars," said Woolworths.

In terms of Woolworths Financial Services, there was good growth in the group's share of profit from the joint venture due to significantly lower levels of bad debts and the restructured insurance business.

No change in debtors book

The impairment charge as a percentage of average gross receivables was 1.6% from 6.2% in 2009, indicating real improvement in the quality of the debt.

The group said the size of its debtors' book remained at the same level as the prior year.

Looking ahead, the retailer said trading in South Africa for the first seven weeks had been positive and its expectations are that turnover growth for the year will be broadly in line with the first half.

"In Australia we expect the tough trading conditions to remain and do not anticipate sales to show a material improvement on prior period," it added.