Coles Myer Group

EX-1 3 append4e.htm Coles Myer Group Coles Myer Ltd.

Appendix 4E

Preliminary Final Report

for the 52 weeks ended 27 July 2003

(previous corresponding period: 52 weeks ended 28 July 2002)

Results for announcement to the market

				$m
Revenue from ordinary activities	up	3.3%	to	27,625.6
Profit from ordinary activities after tax attributable to members	up	21.4%	to	*429.5
Net profit for the period attributable to members	up	21.4%	to	*429.5

Dividends	Amount per security		Franked amount per security at 30% tax
Interim dividend	13.5 cents		13.5 cents
Final dividend	12.5 cents		12.5 cents
Total dividend	26.0 cents		26.0 cents
Record date for determining entitlements to the dividend	17 October 2003

* Profit is after adjusting for accounting policy changes. The pre tax effect of supplier promotional rebates $(79.3) million - relating to 2003 $(2.8) million¹, relating to prior periods $(76.5) million. Also relating to 2003, liquor licenses $10.3 million¹ and indirect logistics $5.0 million¹. The tax effect of these accounting policy changes is $22.3 million. The previous corresponding periods have not been adjusted. Refer page 14 for full detail of accounting policy changes.

Statement of Financial Performance

	2003 $m	2002 $m

Sales	27,016.6	25,688.7
Cost of goods sold	(19,618.6)	(19,419.9)
Gross profit	7,398.0	6,268.8
Other revenues from operating activities	17.7	650.6
Cumulative effect of change in accounting policy for supplier promotional rebates	*(76.5)
Other revenue from non-operating activities	275.3	286.3
Proceeds from sale of property, plant and equipment, and businesses and controlled entities	392.5	111.8
Net book value of property, plant and equipment, and businesses and controlled entities disposed	(416.8)	(123.9)
Borrowing costs	(86.9)	(102.9)
Advertising expenses	(383.8)	(323.0)
Selling and occupancy expenses	(5,319.1)	(5,150.4)
Administrative expenses	(1,183.2)	(1,126.3)
Profit from ordinary activities before income tax expense	617.2	491.0
Income tax expense	(187.7)	(137.2)
Net profit	429.5	353.8
Net increase/(decrease) in asset revaluation reserve	83.5	(4.2)
Net decrease in foreign currency translation reserve	(17.1)	-
Adjustment resulting from change in accounting policy for annual leave entitlements (page 15)	(6.6)
Total revenues, expenses and valuation adjustments attributable to members of Coles Myer Ltd. recognised directly in equity	59.8	(4.2)
Total changes in equity other than those resulting from transactions with owners as owners	489.3	349.6

Earnings per share
Basic earnings per share	32.2 cents	26.1 cents
Diluted earnings per share	33.2 cents	27.4 cents

* Profit is after adjusting for accounting policy changes. Supplier promotional rebates $(79.3) million - relating to 2003 $(2.8) million¹, relating to prior periods $(76.5) million. Liquor licenses $10.3 million¹ and indirect logistics $5.0 million¹. The previous corresponding periods have not been adjusted. Refer page 14 for full detail of accounting policy changes.

Statement of Financial Position
	2003 $m	2002 $m

Current assets
Cash	905.5	866.0
Receivables	346.0	288.7
Inventories	2,836.8	2,808.9
Other	28.1	53.2
Total current assets	4,116.4	4,016.8
Non-current assets
Receivables	121.5	129.6
Investments	105.8	109.2
Property, plant and equipment	3,340.6	3,499.5
Deferred tax assets	221.9	258.3
Intangibles	494.0	238.2
Other	29.8	37.8
Total non-current assets	4,313.6	4,272.6
Total assets	8,430.0	8,289.4
Current liabilities
Payables	2,476.3	2,270.7
Interest bearing liabilities	10.8	15.3
Tax liabilities	13.6
Provisions	540.8	640.6
Total current liabilities	3,041.5	2,926.6
Non-current liabilities
Interest bearing liabilities	1,143.3	1,552.8
Deferred tax liabilities	175.1	249.5
Provisions	244.4	204.3
Other	49.3	48.6
Total non-current liabilities	1,612.1	2,055.2
Total liabilities	4,653.6	4,981.8
Net assets	3,776.4	3,307.6
Equity
Contributed equity	2,210.3	2,032.3
Reserves	468.8	402.4
Retained profits	1,097.3	872.9
Total equity	3,776.4	3,307.6

Statement of Cash Flows
	2003 $m	2002 $m
	Inflows/(outflows)
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)	28,904.1	27,540.3
Payments to suppliers and employees (inclusive of goods and services tax)	(27,469.2)	(26,259.9)
Distributions received from associated entities	6.2	5.6
Interest received	20.0	15.0
Borrowing costs paid	(103.6)	(105.9)
Income tax paid	(179.1)	(77.1)
Net cash inflow from operating activities	1,178.4	1,118.0
Cash flows from investing activities
Payments for property, plant and equipment	(625.2)	(507.7)
Payments for purchase of businesses and controlled entities	(241.7)	(70.4)
Payment for purchase of associated entity	(1.4)	(0.1)
Proceeds on sale of property, plant and equipment	37.1	31.1
Proceeds on sale of Sydney Central Plaza	372.8
Proceeds on sale of businesses and controlled entities		57.8
Proceeds on sale of investments	7.6	2.3
Repayment of loan from other entities	13.6	41.6
Net cash (outflow) from investing activities	(437.2)	(445.4)
Cash flows from financing activities
Proceeds from issue of shares and options	-	-
Payments for shares bought back		(1.4)
Proceeds from borrowings	279.7	924.4
Repayments of borrowings	(704.6)	(1,022.4)
Dividends paid	(287.6)	(285.3)
Net cash (outflow) from financing activities	(712.5)	(384.7)
Net increase in cash held	28.7	287.9
Cash at beginning of the year	866.0	578.1
Cash at end of the year	894.7	866.0

Reconciliation of net cash inflow from operating activities to net profit is as follows:
Net cash inflow from operating activities	1,178.4	1,118.0
Depreciation and amortisation	(504.2)	(484.6)
Changes in assets and liabilities
Increase in current receivables	69.5	27.0
(Decrease) in inventories	(24.0)	(104.1)
(Decrease)/increase in future income tax benefits	(38.3)	28.4
(Decrease)/increase in other assets	(29.6)	17.9
(Increase) in trade creditors	(105.1)	(213.8)
(Increase)/decrease in other liabilities	(55.0)	90.4
(Increase) in provision for taxation	(20.3)	(28.1)
(Increase) in provisions	(79.2)	(44.9)
Decrease/(increase) in deferred income tax	74.4	(29.9)
Net loss on disposal of plant and equipment	(31.2)	(27.0)
Net profit on sale of freehold properties	1.4	15.0
Net profit/(loss) on sale of businesses and controlled entities	5.5	(0.1)
Write-down of non-current assets to recoverable amounts	(12.8)	(10.4)
Net profit	429.5	353.8

Statement of Cash Flows (continued)
Acquisitions/Disposals
Details of the aggregate cash flows relating to acquisition and disposal of businesses and controlled entities and the assets and liabilities at the date of acquisition and disposal are as follows:

	Acquisitions*			Disposals
	2003 $m	2002 $m		2003 $m		2002 $m

Consideration	(362.6)	(70.4)		372.8		66.5
Cash	3.2					(8.7)
Receivables - current	17.6			(2.1)		(1.9)
Inventories	51.8	12.9				(4.1)
Other assets - current	2.4			(1.2)		(0.2)
Property, plant and equipment	45.8	25.4		(363.0)		(64.6)
Deferred tax assets	2.0	1.4				(3.4)
Intangibles	260.2	37.0				(13.4)
Other assets - non-current						(0.3)
Payables - current	(19.1)	(1.3)		(1.0)		18.9
Provisions - current	(1.3)	(4.5)				6.2
Interest bearing liabilities - non-current		(0.5)
Provisions - non-current						1.1
Net assets acquired/(disposed)	362.6	70.4		(367.3)		(70.4)
Reconciliation of cash flows:
Cash consideration	(362.6)	(70.4)		372.8		66.5
Consideration satisfied by share issuance	117.7
Cash acquired/(disposed)	3.2					(8.7)
Cash (Outflow)/Inflow	(241.7)	(70.4)		372.8		57.8
* Net assets acquired are recorded at fair value Significant transactions included in the above table
On May 26, 2003 Liquorland (Australia) Pty Ltd., a wholly owned controlled entity of Coles Myer Ltd., acquired 100% of the issued share capital of Pallas Newco Pty. Ltd. and ALW Newco Pty. Ltd (Theo's NSW) for $179.8 million, plus associated inventory for $37.4 million, and freehold property for $14.8 million which is currently proposed as a sale and leaseback transaction. The consideration comprises cash, and the issue of 17,857,143 Coles Myer Ltd. ordinary shares. Coles Myer Ltd. has guaranteed a value of $7.00 per share throughout a period of three years, commencing 26 May 2003, and will bear any share price risk during that period. Should any consideration become payable it will be brought to account as a component of goodwill arising on the acquisition. At balance date, no amount would have been payable. On January 6, 2003 Officeworks Superstores Pty. Ltd., a wholly owned controlled entity of Coles Myer Ltd., acquired 100% of the issued share capital of Viking Direct Pty. Ltd. and Viking Office Products Pty Ltd. for $38.7 million, plus associated inventory for $11.1 million, and freehold property for $17.5 million which is currently proposed as a sale and leaseback transaction. On March 10, 2003 the Coles Myer Group sold Sydney Central Plaza for $372.8 million, net of transaction and sale related costs of $17.2 million. During 2002 Coles Supermarkets (Australia) Pty. Ltd. and Bi-Lo Pty Ltd., both wholly owned controlled entities of Coles Myer Ltd., acquired 35 ex-Franklins stores for $59.3 million. On May 27, 2002 Coles Myer Ltd. sold 100% of its investment in the issued capital of Amalgamated Food & Poultry Pty. Ltd. for $65.0 million.

Statement of Cash Flows (continued)
Reconciliation of Cash For the purposes of the Statement of Cash Flows, cash includes cash on hand, at bank and on short-term deposit, net of bank overdraft. Cash at the end of the year as shown in the Statement of Cash Flows is reconciled to the relevant Statement of Financial Position items as follows:

			2003 $m		2002 $m

Cash assets			905.5		866.0
Bank overdraft			(10.8)
			894.7		866.0

Non-cash financing and investing activities
Financing - CML issued ordinary shares under the Dividend Reinvestment Plan for $60.3 million (2002 $60.0 million). Investments - CML issued ordinary shares for $117.7 million in connection with the purchase of Pallas Newco Pty. Ltd. and ALW Newco Pty. Ltd. During 2002, the CML Group disposed of its investments in Power Investment Funding Pty. Ltd., Investment Funding Pty Ltd., and Label Development Pty. Ltd. for $NIL consideration. As a result, current receivables decreased $115.3 million, current loans decreased $115.3 million, non-current receivables decreased $17.2 million, non-current loans decreased $17.2 million and investments decreased $NIL on disposal.
Details of major financing facilities
Credit standby facilities - The CML Group has $580.0 million (2002 $730.0 million) of committed facilities of which $580.0 million (2002 $730.0 million) was undrawn at balance date. The facilities have maturity dates ranging between October 2003 and August 2008 (2002 maturity dates ranged between May 2003 and August 2007). Commercial paper - The CML Group has commercial paper programmes based in Australia and Europe. The programmes are guaranteed by CML and are supported by the credit standby facilities referred to above. At balance date no commercial paper was on issue (2002 $NIL). Medium term notes - The CML Group has issued medium term notes under a debt issuance programme and under medium term note programmes in both Europe and Australia. It also operated a medium term note programme in the United States on behalf of Coles Myer Finance (USA) Ltd. Medium term notes issued by Coles Myer Finance Ltd. and Coles Myer Finance (USA) Ltd. are guaranteed by CML. At balance date $1,052.4 million (2002 $1,244.3 million) equivalent of medium term notes were on issue. Other loans - $7.5 million (2002 $18.1 million) equivalent of loans, denominated in Japanese yen, were outstanding at balance date with a maturity date of July 2004 (2002 July 2004). $NIL (2002 $327.2 million) of domestic bank loans of various maturities were outstanding at balance date.

Dividends
	2003 $m	2002 $m
Ordinary shares
Interim dividend of 13.5 cents (2002 13.5 cents) per fully paid ordinary share paid 12 May 2003 (2002 13 May 2002). Fully franked at 30% tax rate (2002 30%).	(160.6)	(159.3)

Final dividend of 12.0 cents per fully paid ordinary share paid on 11 November 2002 recognised as a liability at 28 July 2002 but adjusted against retained profits at the beginning of the financial year on the change in accounting policy for providing for dividends (page 14). Fully franked at 30% tax rate (2002 30%).	(142.1)	(142.1)

Reset convertible preference shares (ReCAPS)
Dividend of $3.2589 (2002 $3.2589) per share paid 2 December 2002 (2002 30 November 2001). Fully franked at 30% tax rate (2002 30%).	(22.8)	(22.8)

Dividend of $3.2411 (2002 $3.2411) per share paid 2 June 2003 (2002 31 May 2002). Fully franked at 30% tax rate (2002 30%).	(22.7)	(22.7)

Total dividends	(348.2)	(346.9)
* In previous periods $7.6 million was provided at balance date. As a result of the change in accounting policy this has been adjusted against retained profits (page 14)

Dividends not recognised at year end

In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of 12.5 cents per fully paid ordinary share, fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 10 November 2003 out of retained profits at 27 July 2003, but not recognised as a liability at year end as a result of the change in accounting policy for providing for dividends (page 14), is	151.6

The franked portions of the final dividends recommended after 27 July 2003 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 25 July 2004.
Franking credits Franking credits of $141.4 million (at 30%) are available for the consolidated entity, and will enable the payment of franked dividends for at least the next year.
Dividend reinvestment plan The company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have their dividend entitlements satisfied by the issue of new fully paid ordinary shares, rather than being paid in cash. Shares are issued under the plan at 2.5% discount to the market price. The last date for receipt of election notices for the dividend is 17 October 2003.

Retained profits
	2003 $m	2002 $m

Retained profits at the beginning of the financial year	872.9	866.0
Adjustment resulting from change in accounting policy for providing for dividends (refer page 14)	149.7
Adjustment resulting from change in accounting policy for annual leave entitlements (refer page 15)	(6.6)
Net profit	429.5	353.8
Dividends	(348.2)	(346.9)
Retained profits at the end of the financial year	1,097.3	872.9

NTA backing
	2003 $	2002 $
Net tangible asset backing per ordinary security	2.16	2.02

Interests in associated entities
	Investment		Ownership interest		Principal activity	Balance date
	2003 $m	2002 $m	2003 %	2002 %	Principal activity	Balance date
Unit Trust CMS General Trust	76.8	72.5	50	50	Property ownership	30 June
Partnership Fly Buys Partnership	2.0	2.0	50	50	Loyalty program	31 December
Proprietary company Quids Technology Pty Ltd	-	-	50	50	Software development	30 June

Segment Revenue
	2003 $m	2002 $m
Food & Liquor	16,582.2	16,548.9
Kmart & Officeworks	4,385.5	4,039.0
Myer Grace Bros and Megamart	3,291.4	3,372.3
Target	2,661.8	2,472.2
Emerging Businesses	265.1	277.5
Property and Unallocated	448.3	26.8
Eliminated on consolidation	(32.4)	(26.7)
Subtotal	27,601.9	26,710.0
Interest income	23.7	27.4
Total Revenue	27,625.6	26,737.4

Segment Result*
	2003 $m	2002 $m
Food & Liquor	566.7	546.9
Kmart & Officeworks	103.8	62.4
Myer Grace Bros and Megamart	9.9	(21.6)
Target	89.9	51.7
Emerging Businesses	(10.9)	(15.3)
Property and Unallocated	(79.0)	(57.6)
Subtotal	680.4	566.5
Net borrowing costs	(63.2)	(75.5)
Profit from ordinary activities before income tax	617.2	491.0
Income tax expense	(187.7)	(137.2)
Net profit	429.5	353.8

*Segment results are after adjusting for the accounting policy changes as detailed on page 14. Refer pages 11 to 13 for segment underlying result reconciliation.

Commentary on Segment Revenue and Result

The net profit after tax (NPAT) for the year of $429.5 million is up $75.7 million or 21.4% from $353.8 million reported for 2002. The increase in NPAT is reflected by an increase in basic earnings per share of 23.4% from 26.1 cents per share in 2002 to 32.2 cents per share in 2003.

NPAT after adjusting for the after tax impact of the sale of Sydney Central Plaza of $2.8 million, the reversal of the Kmart NZ onerous lease provision of $12.8 million, and accounting policy changes of $41.7 million was $455.6 million ("Underlying" NPAT) in 2003. This is an increase of $101.8 million, or 28.8% on the 2002 result.

Income tax expense of $187.7 million reflects an effective tax rate of 30.4%.

Food and Liquor

	2003	2002
Sales ($m)	16,538.6	15,892.4
Other revenue ($m)	43.6	656.5
Total Segment Revenue ($m)	16,582.2	16,548.9
Segment Result ($m)	566.7	546.9
Accounting policy changes ($m)	34.0
Exited businesses ($m)	2.5	11.3
Underlying Result ($m)	603.2	558.2

Sales have increased from $15,892.4 million to $16,538.6 million, an increase of $646.2 million, or 4.1%. After adjusting for sales relating to Red Rooster (business exited in May 2002), sales increased from $15,711.1 million to $16,538.6 million, an increase of $827.6 million, or 5.3%.

Other revenue has declined as a result of the change in accounting policy for rebates. Rebates which were previously recorded as other revenue are now recorded in inventory or cost of goods sold (refer page 14).

The Segment Result (net profit before interest and tax) has increased by $19.8 million, or 3.6% to $566.7 million. The Segment Result after adjusting for accounting policy changes and exited businesses was $603.2 million for 2003 and $558.2 million in 2002 ("Underlying Result"). The Underlying Result increased by $45.0 million, or 8.1%