Woolworths has given its interim results a boost by deciding to hold onto some of its IT assets for seven years rather than replace them after five years.
The decision has allowed the retailer to add £5.9m to its bottom line by cutting the depreciation charge it has taken for the first six months of the year by that amount. It helped the company to record a first-half loss of £59.2m, against a year-earlier loss of £66.8m.
It said today it had “revised the useful economic lives of certain computers and electronic equipment from five to seven years,” but did not specify the IT assets to which the decision applied.
The move to use its IT for equipment for seven years runs counter to advice given to the public sector by the government’s National Audit Office. In July the NAO said that best commercial practice was to dispose of ICT equipment after three years to get the best long-term economic gain.
This gain arises from the fact that much the IT equipment still has real economic value after three years and can be sold on rather than having to be disposed of later when it has no resale value.
Trevor Bish-Jones, Woolworth’s chief executive, said today that the firm remained cautious about the retail environment and so it was “continuing to run the business tightly, with a focus on cash, cost control and margins.”
Woolworths also said it had made improvements to its supply chain and IT systems in the first half of the year, enabling more effective deployment of stock.
It said the improvements had contributed to a year-on-year 110 basis point improvement in margin and a reduction of stock of £18.2m at the half-year. But it said this stock reduction had had “no adverse impact on availability levels which have, on continuity lines, run at historic highs.”
The retailer has made several acquisitions in the past year, including the purchase of THE and Bertrams a year ago. It said that these deals had generated a range of “complex IT issues” and staff training needs with which is was currently engaged.
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