RNS Number:9546S
Coles Myer Ld
14 March 2002
REVIEW OF GROUP RESULTS
RESULTS SUMMARY 2002 2001 Change
26 weeks 26 weeks
$m $m
Sales(1) 13,279.1 12,300.4 8.0%
Retail EBIT(2) 374.8 380.1 (1.4)%
% to Sales
Food and Liquor Group 261.6 241.5 8.3%
% to Sales 3.27% 3.35%
General Merchandise and Apparel Group 120.1 152.3 (21.1)%
% to Sales 2.34% 3.08%
e.colesmyer (6.9) (13.7) 49.6%
% to Sales (4.69)% (9.36)%
Property 18.5 34.2
Unallocated costs (50.0) (17.7)
Underlying(3) EBIT 343.3 396.6 (13.4)%
Net borrowing costs (47.5) (66.6)
Underlying(3) net profit before tax 295.8 330.0 (10.4)%
Income tax expense on underlying profit (83.3) (95.2)
Underlying(3) net profit after tax 212.5 234.8 (9.5)%
Abnormal items(4) - (37.8)
Income tax benefits - (0.6)
Net profit after tax 212.5 196.4 8.2%
Earnings per share (basic) (cents) 16.1 16.4
Ordinary dividend per share 13.5 13.5
Return on investment (%)(5) 12.8 14.4
Operating cash flow before interest and tax 818.2 455.5
Operating cash flow 652.1 326.7
Free cashflow(6) 379.6 73.0
Net debt/Net debt & equity (%) 20.4 24.3
Fixed charges cover (times)(7) 2.1 2.2
(1)Excluding Goods & Services Tax (GST).
Excluding Katies (sold in November 2000), CML sales rose by 8.4% in the half
year.
(2)Earnings before interest and tax for retail operations.
(3)2001 underlying result is stated before abnormal items.
(4)Under revised accounting standard AASB 1018, abnormal items did not exist for
the full year 2001. Abnormal items were, however, reported in the half
yearly accounts and included inventory write-downs at Target and Myer Grace
Bros of $25.0m post tax; and $13.4m tax expense adjustment for the change in
corporate tax rates in FY2001 and FY2002.
(5)Moving annual underlying EBIT as a percentage of net assets employed
excluding tax balances and net debt (funds employed).
(6)Operating cashflow less investing cashflow.
(7)EBITDA before fixed charges divided by fixed charges (lease rental & net
borrowing costs).
Page 1
OVERVIEW
• Net profit after tax of $212.5m
• Significant progress on GM&A brand repositioning
• Substantial reduction in GM&A inventory levels
• Sales momentum building - Food & Liquor up 11%, GM&A up 4.9%(1)
• Next phase of Operation Right Now - savings now total $300m by 2004
The critical issue for shareholders was arresting the steep earnings decline in
the General Merchandise and Apparel (GM&A) businesses that occurred in the six
month period to July 2001. The early results of the re-build initiatives have
been pleasing. Sales growth momentum has returned and, importantly, inventory
levels have been substantially reduced in the three GM&A brands. In achieving
this progress, it has been necessary to reinvest in service and pricing levels,
which has impacted margins in the short term.
The challenges faced in rebuilding each of the GM&A brands are quite different.
The strategies being implemented and the pace at which each business will
respond will vary.
We remain confident that our brands have clearly differentiated positions: Kmart
as a low cost, discount department store with ranges for the entire family;
Target with affordable, on-trend, high quality merchandise; and MGB as a value
driven department store, providing a complete range of well known brands and
good service in a pleasurable store environment.
While the turnaround is underway in GM&A, Food and Liquor continues to build on
its strengths. Food & Liquor's strong sales increase of 11% to $7,995m was
assisted by the successful acquisition of Franklins stores. In GM&A, where
customers responded to improved ranges, service levels and price, sales
increased by 4.9%.
Net profit after tax of $212.5m was recorded for the half year ended 27 January,
2002. This represents a 9.5% decrease on underlying net profit after tax on last
year, with sales increasing 8%(2) to $13,279m.
The initial phase of Operation Right Now identified annualised cost savings of
$40 million in FY2002, increasing to $90m by end FY2004. It is now anticipated
that the cost savings in FY2002 will be $100m, and these will predominantly be
used to improve competitiveness. Early indications from the Company wide review
of areas including supply chain, shared services and OH&S, has identified
additional annualised savings of $210m by the end of FY2004. A proportion of
these cost savings will continue to be passed on to customers. Further updates
will be provided as the review process progresses through other areas of the
Company.
Directors have declared a fully franked interim dividend of 13.5 cents per
share.
(1)Excluding Katies (sold November 2000).
(2)Includes Katies. Excluding Katies, CML sales rose by 8.4% in the half year.
Page 2
RETAIL OPERATIONS
FOOD & LIQUOR GROUP
2002 2001 Change
Sales ($m) 7,995.0 7,202.9 11.0%
Retail EBIT ($m) 261.6 241.5 8.3%
- excl 2001 acctng policy change(1) 261.6 233.7 11.9%
Retail margin (%) 3.27 3.35 (8)bp
- excl 2001 acctng policy change 3.27 3.24 3bp
Operating gross margin (%) 24.33 24.64 (31)bp
Cost of doing business / sales (%) 21.06 21.29 (23)bp
Net assets employed(2) (NAE) ($m) 1,838.6 1,673.0
• Strong sales growth - up 11%
• 37 Franklins stores acquired
• Ongoing cost savings - cost of doing business ratio down to 21.06%
The Food and Liquor Group (F&L) comprises Coles, Bi-Lo, Liquorland and Red
Rooster. Sales rose by a strong 11.0% during the half, reflecting ongoing growth
in an already robust business, as well as contributions from the acquisition of
Franklins stores, Australian Liquor Group (ALG) and Leda Hotels.
Retail EBIT rose by 8.3%, or 11.9% excluding one-time benefits from accounting
policy changes in 2001. As expected, the gross margin was temporarily diluted by
the supermarket and liquor acquisitions, including store set-up costs, re-
staffing and marketing. Competitive pressures, particularly in liquor, also
restrained margins. In addition, the amortisation of the newly acquired liquor
licenses impacted returns.
Importantly, our ongoing focus on costs resulted in a 23 basis point fall in the
cost of doing business (CODB) to 21.06%. Further savings are expected going
forward through Operation Right Now.
F&L's performance should continue to improve over the balance of 2002 as the
acquisitions are progressively bedded down and cost efficiencies continue to
build. The full year F&L EBIT margin is likely to remain below 2001, with the
acquisitions expected to break-even in the second half and achieve F&L group
margins by the end of 2003.
The integration of ex-Franklins stores is progressing smoothly, with sales in
line with expectations. Our dual branded strategy with Coles and Bi-Lo has
assisted in attracting previous Franklins' customers.
A further 17 ex-Franklins stores were secured in the second quarter, bringing
the total to 37. The additional acquisition cost was $15m, with annualised sales
of around $270m. Additional capital refurbishment costs of $32m are expected.
Trading commenced in 29 ex-Franklins stores during the half, and a further 9 new
supermarkets were also opened during this period.
(1)Accounting policy change related to a modification in the method of inventory
costing, to recognise purchase settlement income and direct costs of operating
distribution centres as a cost of inventory
(2)Net assets employed excluding net tax balances and net debt
Page 3
The re-badging of the ALG stores to Liquorland and Vintage Cellars is mostly
complete and marketing programs have commenced.
GENERAL MERCHANDISE & APPAREL GROUP
2002 2001 Change
Sales ($m) 5,137.4 4,899.7 4.9%
Retail EBIT ($m) 120.1 157.0 (23.5)%
- excl 2001 acctng policy change 120.1 142.7 (15.8)%
Retail margin (%) 2.34 3.20 (86)bp
- excl 2001 acctng policy change 2.34 2.91 (57)bp
Operating gross margin (%) 31.86 33.73 (187)bp
Cost of doing business / sales (%) 29.52 30.53 (101)bp
NAE ($m) 2,064.9 2,526.5
Note - Table excl Katies (sold November 2000). Katies 2001 sales $52.3m and
EBIT loss $4.7m.
• Solid earnings improvement in Target
• Substantial reduction in GM&A inventory levels
• Customers responding to differentiated positioning with stronger sales growth
GM&A includes the Target, Myer Grace Bros, Megamart, Kmart and Officeworks
businesses. GM&A has made promising early progress in its rebuild program.
Customers responded positively to improving ranges, service levels and price
competitiveness. Sales rose by 4.9% over the half year, including acceleration
to 6.9% sales growth in the important second quarter, which incorporates the
Christmas and clearance season.
GM&A reported retail EBIT of $120.1m. Whilst this result is below the first half
last year, importantly, we have been able to turn around the substantial
earnings decline experienced in the second half of last year. The reduction in
EBIT is a reflection of our significant reinvestment in staff and pricing, as we
progressively reposition the brands.
While gross margin fell over the period, driven largely by Kmart's strategic
price repositioning, the increasing flow of cost savings from Operation Right
Now reduced the CODB by 101bp to 29.52%. As this was in spite of a significant
increase in labour expenses at Myer Grace Bros, the underlying CODB improvement
was much greater. The benefits of Operation Right Now will build incrementally
in the second half of this year.
Our summer clearance program is on plan. Total GM&A year-on-year inventory
levels fell by 17%, with Target achieving the greatest improvement. This has
resulted in increased stock turns and lower working capital.
Target
2002 2001 Change
Sales ($m) 1,305.3 1,282.5 1.8%
Retail EBIT ($m) 40.0 14.0 186%
- excl 2001 acctng policy change 40.0 7.5 433%
Retail margin (%) 3.06 1.09 197bp
- excl 2001 acctng policy change 3.06 0.58 248bp
NAE ($m) 489.3 662.5
Page 4
Target reported retail EBIT of $40m, on sales growth of 1.8%. The challenge
facing this brand was a need to reduce inventory levels while introducing new
apparel ranges. By addressing these issues, we have been able to record a strong
earnings improvement.
Retail EBIT recovered by $26.0m to $40.0m, which has been driven by new apparel
ranges trading well at fuller margins. This compares with aggressive stock
clearances of apparel last year.
Target's year-on-year inventory levels have been reduced by a substantial 26%.
Clearance of discontinued home and entertainment stock has been largely
completed, and new lines are being progressively introduced.
Target is now clearly focused on the right positioning, operational efficiencies
and delivering on-trend, high quality merchandise at very affordable prices.
Myer Grace Bros
2002 2001 Change
Sales ($m) 1,763.8 1,677.9 5.1%
Retail EBIT ($m) 36.4 68.1 (46.5)%
- excl 2001 acctng policy change 36.4 63.5 (42.7)%
Retail margin (%) 2.06 4.06 (200)bp
- excl 2001 acctng policy change 2.06 3.78 (172)bp
NAE ($m) 788.2 891.4
Myer Grace Bros (MGB), including Megamart, reported EBIT of $36.4m. Sales
increased by 5.1% during the half, including 6.9% growth in the second quarter.
The key issue for this brand was service, range and store presentation. In
effect, a major brand restoration was required, resulting in a longer lead-time
compared to Target's recovery.
The reinvestment in service and store presentation began in February 2001 and is
critical for building sustainable sales momentum, however, margins have been
impacted as revenue progressively rebuilds.
As further initiatives of Operation Right Now feed through and range
improvements continue, we expect a profitable result in the second half this
year. This compares with the $40.0m loss recorded in the second half of last
year.
Inventories have been well managed, falling by 15% year-on-year, and are
at an appropriate level and quality going into winter.
The development of Megamart continued, with the opening of the Perth store in
August.
Page 5
Kmart and Officeworks
2002 2001 Change
Sales ($m) 2,068.3 1,939.3 6.7%
Retail EBIT ($m) 43.7 74.9 (41.7)%
- excl 2001 acctng policy change 43.7 71.7 (39.1)%
Retail margin (%) 2.11 3.86 (175)bp
- excl 2001 acctng policy change 2.11 3.70 (159)bp
NAE ($m) 787.4 972.6
Kmart's market positioning requires it to be a low cost and low price operator.
While it was clear that cost savings would not be realised immediately, the
decision was made to reduce prices to protect market share. This strategy has
impacted margins in the short term. However, profitability has improved
considerably from the decline in the second half of 2001.
Customers have responded well to Kmart's new competitive price positioning, with
Kmart and Officeworks' combined sales increasing by 6.7% over the half year,
including 10.0% growth in the second quarter.
The second half of 2002 will benefit from continued strong sales momentum, and
cost savings will progressively flow through with the implementation of Group
initiatives and supply chain efficiencies.
Kmart's excess hardline stock has been cleared, with year-on-year inventory down
13%.
Officeworks continued its solid sales growth despite heavy competition.
E.COLESMYER
2002 2001 Change
Sales ($m) 147.1 146.3 0.5%
Retail EBIT ($m) (6.9) (13.7) 49.6%
Retail margin (%) (4.69) (9.36) 467bp
NAE ($m) 29.5 38.9
e.colesmyer continues to deliver valuable learnings in the evolution of new
business channels, technologies and ideas. It is expected that once these direct
selling concepts are proven, the brands will assume responsibility.
e.colesmyer sales rose by 5.7% in the second quarter, ending the half at 0.5%
growth. Excluding Myer Direct, which reduced its catalogue program in
preparation for a sale of the business, e.colesmyer achieved 16.6% sales growth
over the second quarter, led by strong performances from Harris Technology and
Coles Online.
e.colesmyer halved its retail EBIT loss during the period to $6.9m, through
increasing cost efficiencies and the wind-down of Myer Direct. However, final
closure costs for Myer Direct are expected to impact the second half this year.
Page 6
PROPERTY AND UNALLOCATED EBIT
$m 2002 2001
Unallocated and head office costs (50.0) (17.7)
Gain/(loss) on sale of property 1.4 16.2
Property operating earnings 17.1 18.0
Property and Unallocated EBIT (31.5) 16.5
Unallocated costs rose by $32.3m over the half to $50.0m. The increase was
driven by:
• Executive change costs
• Projects and consultant costs
• Higher shareholder costs, including the relaunch of the shareholder discount
card
• Higher superannuation costs, following a $21m partial holiday last year
(H1 $12m, H2 $9m)
Second half unallocated costs are expected to be largely in line with last year.
Many of the 2002 additional costs are one-off in nature and will not carry
forward. Full year 2003 costs of approximately $80-90m are expected.
The total earnings contribution from property fell from $34.2m in 2001 to $18.5m
in 2002. Net gains from property disposals were $1.4m, in contrast to $16.2m in
2001 when several large properties were sold, including Chadstone Homemaker
Centre and Chatswood Grace Bros. Going forward, non-strategic freehold
properties will continue to be sold. Property operating earnings fell by $0.9m
to $17.1m, impacted by the sale of the above assets. The book value of the
property portfolio at half year end was $630.0m (2001: $623.6m).
INTEREST AND TAX
Net borrowing costs decreased from $66.6m in 2001 to $47.5m, with the Company
benefiting from lower interest rates and working capital, and the full effect of
the Reset Convertible Preference Shares reducing debt levels.
Income tax expense of $83.3m reflects an effective tax rate of 28.2%, compared
with 28.8% (excluding abnormals) in 2001. A tax rate of 28% continues to be
expected for the full year.
BALANCE SHEET & FINANCIAL PROFILE
$m 2002 2001
Inventory 2,928.0 3,250.6
Trade creditors (inventory related) (1,892.3) (1,693.9)
Net investment in inventory 1,035.7 1,556.7
Trade debtors 170.9 165.7
Working capital (basic) 1,206.6 1,722.4
Intangible assets 348.1 158.2
Fixed assets 3,488.2 3,495.1
Other net assets (973.2) (650.4)
Funds employed 4,069.7 4,725.3
Net tax balances 82.5 (69.6)
Net assets employed 4,152.2 4,655.7
Net debt (845.5) (1,129.3)
Shareholders' funds 3,306.7 3,526.4
Page 7
Net debt fell by 25.1% to $845.5m. The Company remains comfortably within its
financial gearing targets, with net debt to capital employed (net debt plus
equity) at 20.4% (2001: 24.3%). Net borrowing costs cover ratio at 7.2 times
(2001: 6.0 times) is well within the internal target. Fixed charges cover at 2.1
times (2001: 2.2 times) is temporarily at the lower end of the preferred range
of 2.2 to 2.5 times until earnings recover.
Inventory fell by $322.6m to $2,928.0m. This reflected a 17% fall in GM&A, while
F&L inventory rose with the acquisition of ex-Franklins stores. As a result, the
Group's days stock cover was reduced by 12.8 to 55.5 days.
Trade creditors (inventory related) rose by $198.4m to $1,892.3m. Net investment
in inventory fell by $521.0m to $1,035.7m. Working capital (basic) declined from
$1,722.4m to $1,206.6m. Funds employed accordingly fell from $4,725.3m to
$4,069.7m.
The Company's credit ratings remain at investment grade quality. At January
2002, the long and short term ratings from Standard and Poor's were BBB+/A-2
and Moody's Investors Service ratings were Baa2/P-2.
CASH FLOW AND CAPITAL EXPENDITURE
$m 2002 2001
EBIT before depreciation & amortisation 599.0 639.5
Working capital change 306.8 (413.2)
Other operating cashflows (84.8) 232.0
Interest (59.6) (56.0)
Tax (109.3) (75.6)
Operating cash flow 652.1 326.7
Capex, acquisitions & investments (303.7) (293.9)
Asset sales, other 31.2 40.2
Free cash flow 379.6 73.0
Dividends paid (135.0) (125.9)
Net cash flow 244.6 (52.9)
Operating cashflow rose by a strong $325.4m to $652.1m, reflecting a $720m
improvement in working capital change. Capital expenditure on property, plant
and equipment of $303.7m included $46.2m for the acquisition of ex-Franklins
stores. Importantly, free cashflow rose by $306.6m to $379.6m. Full year 2002
capital expenditure of approximately $700m is expected.
OUTLOOK
Much has been achieved in a short time, and this result marks just the first
phase of what is expected to be a 2-3 year turnaround program.
We continue to anticipate full year 2002 net profit after tax to be around 20%
higher than last year's underlying net profit(1) result, subject to stable
economic and market conditions.
(1)2001 underlying profit was $333m.
Page 8
Half Yearly Report
Name of entity
COLES MYER LTD.
ABN Half yearly Half year/financial year ended ('current
period')
11 004 089 936 26 weeks ended 27 January 2002
For announcement to the market
$M
Sales revenue from ordinary activities (item 1.1) up 8.0% to 13,279.1
Profit (loss)from ordinary activities after tax (before up 8.4% to 215.9
amortisation of goodwill) attributable to members (item 1.27)
Profit (loss) from ordinary activities after tax attributable to up 8.2% to 212.5
members (item 1.12)
Profit (loss) from extraordinary items after tax attributable to gain (loss) NIL NIL
members)
Net profit (loss) for the period attributable to members (item up 8.2% to 212.5
1.12)
Dividends (distributions) Amount per security Franked amount per
security at 30% tax
(2001: 34%)
Interim dividend (Half yearly report only - item 16.6) 13.5c 13.5c
Previous corresponding period (Half yearly report - item 16.7) 13.5c 13.5c
Record date for determining entitlements to the dividend,
(in the case of a trust, distribution) (see item 16.2) 12 April 2002
Brief explanation of omission of directional and percentage changes to profit in
accordance with Note 1 and short details of any bonus or cash issue or other
item(s) of importance not previously released to the market:
NIL
Page 9
Consolidated Statement of Financial Performance
Previous
Current period- corres-
ponding
period-
$M $M
1.1 Sales 13,279.1 12,300.4
1.2 Cost of goods sold (10,030.7) (9,211.3)
1.3 Gross profit 3,248.4 3,089.1
1.4 Other revenue from operating activities 377.1 379.3
1.5 Revenue from non-operating activities 181.1 167.5
1.6 Borrowing costs (55.4) (74.3)
1.7 Advertising expenses (178.1) (175.8)
1.8 Selling and occupancy expenses (2,581.9) (2,482.0)
1.9 Administrative expenses (695.4) (611.6)
1.10 Profit (loss) from ordinary activities before tax 295.8 292.2
1.11 Income tax expense (83.3) (95.8)
1.12 Net profit attributable to members of the
parent entity 212.5 196.4
1.13 Net increase in asset revaluation reserve 2.8
1.14 Net increase in foreign currency translation
reserve 2.5
1.15 Total revenues, expenses and valuation
adjustments attributable to members of Coles
Myer Ltd. recognised directly in equity 2.8 2.5
1.16 Total changes in equity other than those
resulting from transactions with owners as owners 215.3 198.9
Earnings per share
1.17 Basic earnings per share 16.1 cents 16.4 cents
1.18 Diluted earnings per share 16.8 cents 16.5 cents
Earnings per share in the previous corresponding period has changed to ensure
the comparative is consistent with the application of the revised standard AASB
1027 Earnings Per Share.
Consolidated retained profits
Previous
Current period- corres-
ponding
period-
$M $M
1.19 Retained profits (accumulated losses) at the
beginning of the financial period 866.0 1,159.7
1.20 Net profit (loss) attributable to members (item
1.12) 212.5 196.4
1.21 Net transfers to and from reserves
1.22 Net effect of changes in accounting policies
1.23 Dividends and other equity distributions paid
or payable (182.0) (163.0)
1.24 Retained profits (accumulated losses)
at end of financial period 896.5 1,193.1
Page 10
Profit restated to exclude amortisation of Current period Previous
goodwill $M corres-
ponding
period
$M
1.25 Profit (loss) from ordinary activities after tax 215.9 199.1
before outside equity interests and amortisation
of goodwill
1.26 Less (plus) outside equity interests
1.27 Profit (loss) from ordinary activities after 215.9 199.1
tax (before amortisation of goodwill)
attributable to members
Profit (loss) from ordinary activities attributable to members
Current period Previous
$M corres-
ponding
period
$M
1.28 Profit (loss) from ordinary activities after tax
(item 1.12) 212.5 196.4
1.29 Less (plus) outside equity interests
1.30 Profit (loss) from ordinary activities after
tax, attributable to members 212.5 196.4
Intangible and Consolidated - current period
extraordinary items
Amount
Related (after tax)
outside equity attributable
Before tax Related tax interests to members
$M $M $M $M
2.1 Amortisation of goodwill 3.4 3.4
2.2 Amortisation of other intangibles 9.5 (1.4) 8.1
2.3 Total amortisation of intangibles 12.9 (1.4) NIL 11.5
2.4 Extraordinary items
2.5 Total extraordinary items NIL NIL NIL NIL
Current year - Previous year -
Comparison of half year profits $M $M
(Preliminary final report only)
3.1 Consolidated profit (loss) from ordinary
activities after tax attributable to members
reported for the 1st half year (item 1.10
in the half yearly report) N/A N/A
3.2 Consolidated profit (loss) from ordinary
activities after tax attributable to members
for the 2nd half year N/A N/A
Page 11
Consolidated Statement of Financial Position At end of current As shown in last As in last half
period annual report yearly report
Current assets $M $M $M
4.1 Cash assets 293.3 270.5 294.7
4.2 Receivables 560.7 705.1 526.0
4.3 Investments
4.4 Inventories 2,928.0 2,904.2 3,250.6
4.5 Other (provide details if material) 74.9 66.3 52.6
4.6 Total current assets 3,856.9 3,946.1 4,123.9
Non-current assets
4.7 Receivables 151.3 176.5 355.8
4.8 Investments (equity accounted)
4.9 Other investments 113.5 108.2 121.5
4.10 Inventories
4.11 Exploration and evaluation expenditure
capitalised (see para.71 of AASB 1022)
4.12 Development properties (mining entities)
4.13 Other property, plant and equipment (net) 3,488.2 3,464.2 3,495.1
4.14 Deferred tax assets 225.3 231.9 237.1
4.15 Intangibles (net) 348.1 308.8 158.2
4.16 Other (provide details if material) 40.1 42.1 15.3
4.17 Total non-current assets 4,366.5 4,331.7 4,383.0
4.18 Total assets 8,223.4 8,277.8 8,506.9
Current liabilities
4.19 Payables 2,435.2 2,186.8 2,271.9
4.20 Interest bearing liabilities 19.7 12.5 26.4
4.21 Loans 115.3
4.22 Tax liabilities 85.3
4.23 Provisions 705.2 663.2 637.5
4.24 Other (provide details if material)
4.25 Total current liabilities 3,160.1 2,977.8 3,021.1
Non-current liabilities
4.26 Payables
4.27 Interest bearing liabilities 1,375.2 1,651.6 1,427.7
4.28 Loans 1.1 19.8 192.0
4.29 Tax liabilities 214.7 219.5 221.3
4.30 Provisions 115.5 110.1 64.0
4.31 Other (provide details if material) 50.1 52.7 54.4
4.32 Total non-current liabilities 1,756.6 2,053.7 1,959.4
4.33 Total liabilities 4,916.7 5,031.5 4,980.5
4.34 Net assets 3,306.7 3,246.3 3,526.4
Page 12
At end of current As shown in last As in last half
Equity period annual report yearly report
$M $M $M
4.35 Contributed equity 2,000.8 1,973.7 1,926.0
4.36 Reserves 409.4 406.6 407.3
4.37 Retained profits (accumulated losses) 896.5 866.0 1,193.1
4.38 Equity attributable to members of the
parent entity 3,306.7 3,246.3 3,526.4
4.39 Outside equity interests in controlled
entities
4.40 Total equity 3,306.7 3,246.3 3,526.4
4.41 Preference capital included as part of 4.35 680.6 680.6 681.0
Exploration and evaluation expenditure capitalised
Current period Previous corresponding
$M period- $M
5.1 Opening balance
5.2 Expenditure incurred during current period
5.3 Expenditure written off during current period
5.4 Acquisitions, disposals, revaluation
increments, etc.
5.5 Expenditure transferred to Development
Properties
5.6 Closing balance as shown in the
consolidated balance sheet (item 4.11) NIL NIL
Development properties
Current period Previous corresponding
$M period- $M
6.1 Opening balance
6.2 Expenditure incurred during current period
6.3 Expenditure transferred from exploration and
evaluation
6.4 Expenditure written off during current period
6.5 Acquisitions, disposals, revaluation
increments, etc.
6.6 Expenditure transferred to mine properties
6.7 Closing balance as shown in the
consolidated balance sheet (item 4.12) NIL NIL
Page 13
Consolidated statement of cash flows
Current period Previous
$M corresponding
period-
$M
Cash flows related to operating activities
7.1 Receipts from customers (inclusive of goods and
services tax) 14,271.7 13,173.0
7.2 Payments to suppliers and employees (inclusive of
goods and services tax) (13,453.5) (12,717.5)
7.3 Operating cash flows before distributions, interest
and tax 818.2 455.5
7.4 Cash distributions received from associated entities 2.8 2.8
7.5 Interest and other items of similar nature received 5.6 5.4
7.6 Interest and other costs of finance paid (65.2) (61.4)
7.7 Income taxes paid (109.3) (75.6)
7.8 Net operating cash flows 652.1 326.7
Cash flows related to investing activities
7.9 Payment for purchases of property, plant and
equipment (250.8) (260.7)
7.10 Proceeds from sale of property, plant and
equipment 23.9 7.9
7.11 Payment for purchases of businesses and controlled
entities (net of cash acquired) (50.5) (2.1)
7.12 Repayment of loan from other entities 7.3 6.9
7.13 Payment for purchases of investments (2.4) (30.9)
7.14 Proceeds on sale of investments 25.4
7.15 Payment for purchases of associated entities (0.2)
7.16 Net investing cash flows (272.5) (253.7)
Cash flows related to financing activities
7.17 Proceeds from issues of securities (shares, options,
etc.) 681.0
7.18 Payment for shares bought back (1.4)
7.19 Proceeds from borrowings 676.6 3,380.0
7.20 Repayment of borrowings (951.9) (3,813.4)
7.21 Dividends paid (135.0) (125.9)
7.22 Net financing cash flows (411.7) 121.7
Net (decrease)/increase in cash held (32.1) 194.7
7.23 Cash at beginning of period 578.1 307.7
7.24 Exchange rate adjustments to item 7.23
7.25 Cash at end of period
(see Reconciliation of cash) 546.0 502.4
Free cash flow:
7.8 Net operating cash flows 652.1 326.7
7.16 Net investing cash flows (272.5) (253.7)
Free cash flow 379.6 73.0
Page 14
Non-cash financing and investing activities
Coles Myer Ltd. issued ordinary shares under the Dividend Reinvestment Plan of
$28.5 million (2001 $31.3 million).
The CML Group disposed of its investment in Investment Funding Pty. Ltd., Label
Developments Pty. Ltd. and Power Investment Funding Pty. Ltd. For $NIL
consideration. Current receivables and loans decreased $115.3m and non-current
receivables and loans decreased $17.2m on disposal.
Reconciliation of cash
Reconciliation of cash at the end of the period (as
shown in the consolidated statement of cash flows) to
the related items in the accounts is as follows:
Current period Previous
$M corresponding
period-
$M
8.1 Cash on hand and at bank 293.3 294.7
8.2 Deposits at call 257.2 222.1
8.3 Bank overdraft (4.5) (14.4)
8.4 Other (provide details)
8.5 Total cash at end of period (item 7.25) 546.0 502.4
Ratios Current period Previous
corresponding
period
Profit before tax / sales revenue
9.1 Consolidated profit (loss) from ordinary
activities before tax (item 1.10) as a percentage
of sales revenue (item 1.1) 2.2% 2.4%
Profit after tax / equity interests
9.2 Consolidated net profit (loss) from ordinary
activities after tax attributable to members (item
1.12) as a percentage of equity (similarly
attributable) at the end of the period (item 4.40) 6.4% 5.6%
Earnings per security (EPS) Current period Previous
corresponding
period
10.1 Calculation of the following in
accordance with AASB 1027: Earnings per Share
(a) Basic EPS 16.1c 16.4c
(b) Diluted EPS (if materially different from (a)) 16.8c 16.5c
(c) Weighted average number of ordinary shares
outstanding during the period used in the
calculation of the Basic EPS (000's) 1,178,070 1,166,350
NTA backing Current period Previous
corresponding
period
11.1 Net tangible asset backing per ordinary
security $1.93 $2.30
Page 15
Details of specific receipts/outlays, revenues/expenses
Current period Previous
$M corresponding
period-
$M
12.1 Interest revenue included in determining item
1.10 7.9 7.7
12.2 Interest revenue included in item 12.1 but not
yet received (if material) 2.3 2.3
12.3 Interest expense included in item 1.6 (include all
forms of interest, lease finance charges etc) 55.4 74.3
12.4 Interest costs excluded from borrowing costs,
capitalised in asset values
12.5 Outlays (except those arising from the
acquisition of an existing business) capitalised
in intangibles (if material)
12.6 Depreciation and amortisation (excluding
amortisation of intangibles)* 227.9 226.4
12.7 Other specific relevant items not shown in item
1.12
* Excludes net loss on disposal of plant and equipment of $14.9 million (2001
$7.2 million)
Control gained over entities having material effect
13.1 Name of entity (or group of entities) NIL
13.2 Consolidated profit (loss) from ordinary
activities and extraordinary items after tax
of the entity (or group of entities) since the
date in the current period on which control was
acquired $
13.3 Date from which such profit has been calculated
13.4 Profit (loss) from ordinary activities and
extraordinary items after tax of the entity
(or group of entities) for the whole of the
previous corresponding period $
Loss of control of entities having material effect
14.1 Name of entity (or group of entities) NIL
14.2 Consolidated profit (loss) from ordinary activities
and extraordinary items after tax of the entity
(or group of entities) for the current period to the
date of loss of control $
14.3 Date to which the profit (loss) in item 14.2 has been
calculated
14.4 Consolidated profit (loss) from ordinary activities and
extraordinary items after tax of the entity (or
group of entities) while controlled during the whole of
the previous corresponding period $
14.5 Contribution to consolidated profit (loss) from
ordinary activities and extraordinary items from
sale of interest leading to loss of control $
Page 16
Segment Performance
Segment Revenue
Current period Previous corresponding
$M period- $M
15.1 Food & Liquor 8,337.1 7,449.2
15.2 General Merchandise & Apparel 5,261.3 5,171.0
15.3 e.colesmyer 163.3 155.3
15.4 Property / Unallocated (a) 67.7 64.0
15.5 Total segment revenue 13,829.4 12,839.5
15.6 Interest income (item 12.1) 7.9 7.7
15.7 Total revenue 13,837.3 12,847.2
Segment Result
Current period Previous corresponding
$M period- $M
15.8 Food & Liquor 261.6 241.5
15.9 General Merchandise & Apparel 120.1 114.5
15.10 e.colesmyer (6.9) (13.7)
15.11 Property / Unallocated (a) (31.5) 16.5
15.12 Total segment result 343.3 358.8
15.13 Net Borrowing costs (47.5) (66.6)
15.14 Profit (loss) from ordinary
activities before tax
(item 1.10) 295.8 292.2
The CML Group operates predominantly within the retailing industry and
predominantly in Australia.
Legend:
(a) Rentals derived from the CML Group's own retail outlets are based on
commercial terms and conditions. Property income includes profit on sale
of property of $1.4 million (2001 $16.2 million).
Dividends (in the case of a trust, distributions)
16.1 Date the dividend (distribution) is payable 13 May 2002
16.2 Record date to determine entitlements to the
dividend (distribution) (ie, on the basis of
registrable transfers received up to 5.00 pm if
paper based, or by "End of Day" if a proper SCH
transfer) 12 April 2002
16.3 Not applicable to this Half year report
Page 17
Franked amount Amount per
Amount per per security at security of foreign
security 30% tax source dividend
(2001: 34%)
16.4 Not applicable to this Half yearly report
16.5 Not applicable to this Half yearly report
16.6 Interim dividend: Current Year 13.5c 13.5c
16.7 Previous Year 13.5c 13.5c
Total dividend (distribution) per security (interim plus final)
Current year Previous year
16.8 Ordinary securities N/A N/A
16.9 Preference securities N/A N/A
Half year report - interim dividend (distribution) on all securities
Current period Previous corresponding
$M period- $M
16.10 Ordinary securities 159.3 157.9
16.11 Preference securities 22.7 5.1
16.12 Total 182.0 163.0
The dividend plan shown below is in operation.
A Shareholders' Dividend Reinvestment Plan is in operation.
The last date(s) for receipt of election notices for the
dividend 12 April 2002
Any other disclosures in relation to dividends (distributions)
NIL
Page 18
Details of aggregate share of profits (losses) of associates
Current period Previous corresponding
$M period- $M
Entity's share of associates'
17.1 Profit (loss) from ordinary
activities before income tax
17.2 Income tax on ordinary
activities
17.3 Profit (loss) from ordinary
activities after income tax
17.4 Extraordinary items net of tax
17.5 Net profit (loss)
17.6 Outside equity interests
17.7 Net profit (loss) attributable
to members NIL NIL
Material interests in entities which are not controlled entities
Name of entity
Percentage of ownership interest held Contribution to net profit (loss)
at end of period or date of disposal (item 1.9)
18.1 Equity accounted Current period Previous Current period Previous
associates and joint corresponding - $M corresponding
venture entities period period- $M
18.2 Total NIL NIL NIL NIL
18.3 Other material
interests
18.4 Total NIL NIL NIL NIL
Page 19
Issued and quoted securities at end of current period
Category of securities
Issue price Amount paid up
Total Number per security per security
Number Quoted (cents) (cents)
19.1 RESET CONVERTIBLE
PREFERENCE SHARES
19.2 Balance 29 July 2001 7,000,000 7,000,000
19.3 Issued during the period
19.4 Balance 27 January 2002 7,000,000 7,000,000
19.5 ORDINARY CLASS
SHARES -FULLY PAID
19.6 Balance 29 July 2001 1,176,610,496 1,176,610,496
19.7 Dividend Reinvestment Plan
issue 3,997,410 3,997,410
19.8 Converted from partly paid
shares 6,000 6,000
19.9 Buy-back (222,322) (222,322)
19.10 Balance 27 January 2002** 1,180,391,584 1,180,391,584
19.11 PARTLY PAID ORDINARY
SHARES
19.12 Balance 29 July 2001 152,000 NIL 200 1
19.13 Converted to ordinary shares (6,000) NIL
19.14 Balance 27 January 2002 146,000 NIL 200 1
** On 19 July 2001 the first 500 of each shareholder's ordinary shares were
redesignated on the Australian Stock Exchange as Discount Card Shares. Discount
Card shares remain ordinary class shares following their redesignation and as
such, rank equally with non-Discount Card shares in every respect including
voting and dividend rights. As at 27 January 2002 there were 889,042,376
ordinary shares and 291,349,208 Discount Card shares quoted on the Australian
Stock Exchange.
Coles Myer Ltd. ordinary shares are listed on the New York Stock Exchange in the
form of American Depository Shares (ADS). Each ADS represents eight ordinary
shares. An American Depository Receipt is the certificate issued to the holder,
and can represent any number of ADS. As at 27 January 2002, there were 674,041
(2001 587,594) ADS on issue.
Page 20
Comments by directors
Basis of accounts preparation
This general purpose financial report for the interim half-year reporting period
ended 27 January 2002 has been prepared in accordance with Accounting Standard
AASB 1029 Interim Financial Reporting, other mandatory professional reporting
requirements (Urgent Issues Group Consensus Views), other authoritative
pronouncements of the Australian Accounting Standards Board and the Corporations
Act 2001.
This interim financial report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this report is to
be read in conjunction with the annual report for the year ended 29 July 2001
and any public announcements made by Coles Myer Ltd during the interim reporting
period in accordance with the continuous disclosure requirements of the
Corporations Act 2001.
The accounting policies adopted are consistent with those of the previous
financial year. Where necessary, comparative figures have been adjusted to
conform to changes in presentation in the current year.
Material factors affecting the revenues and expenses of the economic entity for
the current period
Refer accompanying commentary and other public documents.
A description of each event since the end of the current period which has had a
material effect and is not related to matters already reported, with financial
effect quantified (if possible)
Franking credits available and prospects for paying fully or partly franked
dividends for at least the next year
Franking credits of $167.2 million (at 30%) are available for the consolidated
entity, and will enable the payment of franked dividends for at least the next
year.
This amount represents the balance of the Dividend Franking Account after
allowing for current tax, dividend provisions and payments, and franking credits
the CML Group is prevented from distributing.
CML can access sufficient franking credits from its controlled entities to
enable the payment of fully franked dividends for at least the subsequent year.
Changes in accounting policies since the last annual report are disclosed as
follows.
NIL
Changes in contingent liabilities and contingent assets.
Contingent liabilities as at 27 January 2002 were $253.0m, an increase of $85.1m
since 29 July 2001, mainly associated with trading guarantees.
Page 21
Additional disclosure for trusts
20.1 Number of units held by the management
company or responsible entity or their related
parties Not Applicable
20.2 A statement of the fees and commissions
payable to the management company or
responsible entity. Not Applicable
Identify:
• initial service charges
• management fees
• other fees
Annual meeting Not applicable to this Half yearly report
The annual meeting will be held as follows:
Place
Date
Time
Approximate date the annual report will be available
Page 22
Compliance statement
1 This report has been prepared under accounting policies which comply
with accounting standards as defined in the Corporations Law or other
standards acceptable to ASX.
Identify other standards used NONE
2 This report, and the accounts upon which the report is based
(if separate), use the same accounting policies.
3 This report does give a true and fair view of the matters disclosed.
4 This report is based on accounts to which one of the following applies.
The financial statements The financial statements have
have been audited. been subject to review.
The financial statements are in The financial statements have not
the process of being audited or yet been audited or reviewed.
subject to review.
5 If the audit report or review by the auditor is not attached, details of
any qualifications will follow immediately they are available.
6 The entity has a formally constituted audit committee.
Sign here: ................................................. Date: 14 March 2002
Company Secretary
Print name: Kevin Elkington
Page 23
Directors' Report
The directors present their report for the 26 weeks ended 27 January 2002.
Directors
The names of the directors in office at the date of this report are:
Stanley D.M. Wallis, AO Chairman
John E. Fletcher Managing Director and Chief Executive Officer
Patricia E. Akopiantz Non-executive Director
Richard H. Allert, AM Non-executive Director
Richard M. Charlton, AM Non-executive Director
William P. Gurry, AO Non-executive Director
Mark M. Leibler, AO Non-executive Director
Solomon Lew Non-executive Director
Helen A. Lynch, AM Non-executive Director
Martyn K. Myer Non-executive Director
The above directors each held office during and since the end of the period,
except John E. Fletcher who was appointed on 10 September 2001 and Patricia E.
Akopiantz who was appointed on 11 October 2001.
In addition, Dennis K. Eck resigned as Managing Director and Chief Executive
Officer on 9 September 2001, and Ian D. Johnston resigned as a non-executive
director on 11 October 2001.
Review of operations
The results of the operations of the CML Group during the period are reviewed on
pages 1 to 8.
Rounding of amounts
CML is a company of the kind referred to in the Australian Securities &
Investments Commission Class Order 98/0100 dated 10 July 1998. As a result,
amounts in the accompanying financial report have, where appropriate, been
rounded to the nearest one hundred thousand dollars except where otherwise
indicated.
Directors' Declaration
The directors declare that the financial statements and the notes set out on
pages 9 to 22:
a. comply with the Accounting Standards and the Corporations Regulations
2001; and
b. give a true and fair view of the CML Group's financial position at
27 January 2002 and its performance for the 26 weeks ended on that date.
The directors further declare that in their opinion there are reasonable grounds
to believe that CML will be able to pay its debts as and when they become due
and payable.
This directors' report and declaration are made in accordance with a resolution
of the directors.
Stan Wallis John Fletcher
Chairman Managing Director and Chief Executive Officer
Melbourne, 14 March 2002
Page 24
PricewaterhouseCoopers
ABN 52 780 433 757
333 Collins Street
MELBOURNE VIC 3000
GPO Box 1331L
MELBOURNE VIC 3001
DX 77 Melbourne
Australia
Web www.pwcglobal.com/au
Telephone 61 3 8603 1000
Facsimile 61 3 8603 1999
Direct phone 8603 6555
Direct fax 8603 6009
Independent Review Report to the Members of
Coles Myer Ltd.
Scope
We have reviewed the financial report of Coles Myer Ltd. (CML) for the 26 weeks
ended 27 January 2002. The financial report comprises pages 10 to 20 and
Comments by Directors (excluding the reference to accompanying commentary and
other public documents) on page 21 of the half yearly report included in the
attached Appendix 4B of the Australian Stock Exchange (ASX) Listing Rules and
the directors' declaration attached thereto. CML's directors are responsible
for the financial report which includes the consolidated financial statements of
the CML Group comprising CML and the entities it controlled at the end of, or
during, the 26 weeks ended 27 January 2002. We have performed an independent
review of the financial report in order for CML to lodge the financial report
with the Australian Securities & Investments Commission and the ASX. This
review was performed in order to state whether, on the basis of the procedures
described, anything has come to our attention that would indicate that the
financial report is not presented fairly in accordance with Accounting Standard
AASB 1029 "Interim Financial Reporting", other mandatory professional reporting
requirements and the Corporations Act 2001 in Australia, and ASX Listing Rules
relating to half yearly financial reports, so as to present a view which is
consistent with our understanding of the CML Group's financial position, and
performance as represented by the results of its operations and its cash flows.
Our review has been conducted in accordance with Australian Auditing Standards
applicable to review engagements. The review is limited primarily to inquiries
of CML Group personnel and analytical procedures applied to the financial data.
These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance provided is less than that given in an audit.
We have not performed an audit and, accordingly, we do not express an audit
opinion.
Statement
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the financial report of the CML Group is not
in accordance with:
a the Corporations Act 2001, including:
(i) giving a true and fair view of the CML Group's financial position as
at 27 January 2002 and of its performance for the 26 weeks ended on
that date; and
(ii) complying with Accounting Standard AASB 1029 "Interim Financial
Reporting" and the Corporations Regulations 2001; and
b other mandatory professional reporting requirements and ASX Listing Rules
relating to half yearly financial reports.
PricewaterhouseCoopers
Chartered Accountants
Dale McKee 14 March 2002
Partner Melbourne
Liability is limited by the Accountant's Scheme under the Professional Standards
Act 1994 (NSW)
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