South Africa’s Woolworths anticipates higher full year earnings

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Key Highlights:

  • Headlines earnings per share expected to increase between 205% to 215%
  • Earnings per share to climb up 635%- 655%
  • Property sales major contributor to expected increase

South-African based multinational retail group Woolworths Holdings Limited(WHL) has issued a positive half-year earnings guidance for the year ended 27 June 2021 owing to, among other factors, profits from property sales conducted during the period.

In a trading statement issued on Thursday, the Group indicated that headline earnings per share (HEPS), the main profit measure used in South Africa, is projected to increase from 119.8 cents recorded last year to a range of 365.4 cents to 377.4 cents during the period under review.

Earnings per share (EPS) is expected to increase from 58.2 cents recorded last year to between 427.8 cents to 439.4 cents, representing an increase of 635% to 655%.

In addition to property sales, the jump in earnings is also attributed to impairment charges of approximately R364 million (pre-tax) necessitated by the assessment of the carrying value of assets as the Group sought measures to minimise the impact of COVID-19 on its operations.

Also, the renegotiation of various leases resulted in lease exit and modification gains under IFRS 16 of approximately R591 million (pre-tax).

The Group highlighted that EPS includes the above mentioned items, while HEPS excludes the profit arising on the property sales and impairment.

“The sale of the Bourke Street Men’s and Elizabeth Street properties in David Jones were completed in the current year, resulting in net proceeds of A$120.0 million and A$504.4 million and profit on sale of approximately A$23.8 million and A$19.0 million, respectively,” the Group said.

“While the previous year witnessed losses, these were not recognised as deferred tax assets and where utilised against the profit on sale and the leaseback agreement on properties resulted in net deferred tax credit of A$34.9 million being recognized,” added the Group.

The Group’s financial results for the period under review are expected to be released on or around the 26th of August 2021.

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