Woolworths first half diluted earnings up 35.9%

The group's headline earnings per share rose to 135.7 cents for the period, from 100.8 cents.

The company said that due to transitional rules relating to the phasing out of STC and its replacement with the new Dividends Tax, the board has decided to defer the declaration of an interim dividend until after 1 April, but as soon as reasonably possible thereafter.

It is anticipated that the group's full year dividend cover policy, previously 1.5 times headline earnings per share, will be adjusted for the impact of the new tax, resulting in a lower dividend cover ratio, it added.

Revenue was up 11.1% to R14.2 billion and operating profit was 27.8% higher at R1.40 billion.

Group sales for the period grew 11.4% with stronger growth in the second quarter, particularly over the festive season.

Woolworths said sales growth was leveraged by improved gross margins and the favourable foreign exchange impact of a weaker rand, delivering a profit before tax growth of 26.8%.

Shareholders' return on equity increased from 44.9% to 50.8%.

Food sales were up 11.7% and comparable stores increased by 8.4%, while clothing sales, including Country Road in South Africa, were 11.2% higher.

The group said overall clothing and general merchandise grew by 10.1%,with price movement of 7%.

The company's Australian division, Country Road, saw total sales contract 2.4% in Australian dollar terms, with Australian sales continuing to struggle amidst difficult trading conditions, falling 5.5% in comparable stores.

In terms of Woolworths Financial Services, the retailer said the overall book growth was 6.7% up on the prior period with net impairments increasing just 0.1% to 1.7%.

Over the period under review, retail space, including Africa but excluding franchise conversions, grew by 2.3%, net of closures.

"Franchise conversions remain on track with 50 stores now converted and a further nine to be converted during the second half," Woolworths said.

Looking ahead, the Cape Town based company said it believed that economic conditions in SA would remain constrained.

However, it added that trading for the first six weeks of the second half of the financial year had been positive, and it expected sales growth to be broadly in line with the first half.